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GLOBAL PARTNERS LP 10-Q 2014

Documents found in this filing:

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

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q


 

(Mark One)

 

ý

 

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

 

 

 

 

 

 

 

For the quarterly period ended September 30, 2014

 

 

 

 

 

 

 

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 ý No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data 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 ý 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 ý

 

 

The issuer had 27,430,563 common units outstanding as of November 4, 2014.

 

 



Table of Contents

 

TABLE OF CONTENTS

 

 

PART I.         FINANCIAL INFORMATION

 

 

 

Item 1.       Financial Statements

1

 

 

Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013

1

 

 

Consolidated Statements of Income for the three and nine months ended September 30, 2014 and 2013

2

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013

3

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013

4

 

 

Consolidated Statement of Partners’ Equity for the nine months ended September 30, 2014

5

 

 

Notes to Consolidated Financial Statements

6

 

 

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

42

 

 

Item 3.       Quantitative and Qualitative Disclosures about Market Risk

67

 

 

Item 4.       Controls and Procedures

70

 

 

PART II.  OTHER INFORMATION

72

 

 

Item 1.       Legal Proceedings

72

 

 

Item 1A.    Risk Factors

73

 

 

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

73

 

 

Item 6.       Exhibits

74

 

 

SIGNATURES

75

 

 

INDEX TO EXHIBITS

76

 



Table of Contents

 

Item 1.   Financial Statements

 

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2014

 

2013

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

5,545

 

$

9,217

 

Accounts receivable, net

 

529,147

 

686,392

 

Accounts receivable—affiliates

 

3,411

 

1,404

 

Inventories

 

455,709

 

572,806

 

Brokerage margin deposits

 

10,792

 

21,792

 

Fair value of forward fixed price contracts

 

57,121

 

46,007

 

Prepaid expenses and other current assets

 

53,989

 

36,693

 

Total current assets

 

1,115,714

 

1,374,311

 

Property and equipment, net

 

823,583

 

803,636

 

Intangible assets, net

 

54,195

 

67,769

 

Goodwill

 

154,078

 

154,078

 

Other assets

 

30,124

 

28,128

 

Total assets

 

$

2,177,694

 

$

2,427,922

 

Liabilities and partners’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

545,749

 

$

781,119

 

Working capital revolving credit facility—current portion

 

113,000

 

 

Line of credit

 

700

 

3,700

 

Environmental liabilities—current portion

 

3,320

 

3,377

 

Trustee taxes payable

 

82,133

 

80,216

 

Accrued expenses and other current liabilities

 

63,484

 

65,963

 

Obligations on forward fixed price contracts

 

55,754

 

38,197

 

Total current liabilities

 

864,140

 

972,572

 

Working capital revolving credit facility—less current portion

 

92,000

 

327,000

 

Revolving credit facility

 

272,600

 

434,700

 

Senior notes

 

368,012

 

148,268

 

Environmental liabilities—less current portion

 

36,533

 

37,762

 

Other long-term liabilities

 

47,253

 

44,440

 

Total liabilities

 

1,680,538

 

1,964,742

 

Partners’ equity

 

 

 

 

 

Global Partners LP equity:

 

 

 

 

 

Common unitholders (27,430,563 units issued and 27,151,438 outstanding at September 30, 2014 and 27,430,563 units issued and 27,260,747 outstanding at December 31, 2013)

 

456,494

 

426,785

 

General partner interest (0.83% interest with 230,303 equivalent units outstanding at September 30, 2014 and December 31, 2013)

 

391

 

(238

)

Accumulated other comprehensive loss

 

(9,371

)

(11,310

)

Total Global Partners LP equity

 

447,514

 

415,237

 

Noncontrolling interest

 

49,642

 

47,943

 

Total partners’ equity

 

497,156

 

463,180

 

Total liabilities and partners’ equity

 

$

2,177,694

 

$

2,427,922

 

 

 

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

 

1



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit data)

(Unaudited)

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

4,050,458

 

$

4,433,426

 

$

13,737,006

 

$

14,794,372

 

Cost of sales

 

3,895,023

 

4,315,333

 

13,335,922

 

14,523,410

 

Gross profit

 

155,435

 

118,093

 

401,084

 

270,962

 

 

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

41,408

 

27,889

 

110,379

 

79,232

 

Operating expenses

 

53,315

 

46,713

 

152,296

 

137,420

 

Amortization expense

 

4,522

 

4,773

 

13,574

 

13,321

 

Total costs and operating expenses

 

99,245

 

79,375

 

276,249

 

229,973

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

56,190

 

38,718

 

124,835

 

40,989

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(12,324

)

(10,855

)

(35,677

)

(32,113

)

 

 

 

 

 

 

 

 

 

 

Income before income tax expense

 

43,866

 

27,863

 

89,158

 

8,876

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(244

)

(2,727

)

(660

)

(852

)

 

 

 

 

 

 

 

 

 

 

Net income

 

43,622

 

25,136

 

88,498

 

8,024

 

 

 

 

 

 

 

 

 

 

 

Net (income) loss attributable to noncontrolling interest

 

(1,114

)

679

 

(1,699

)

549

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Global Partners LP

 

42,508

 

25,815

 

86,799

 

8,573

 

 

 

 

 

 

 

 

 

 

 

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

 

1,623

 

1,042

 

4,164

 

2,306

 

 

 

 

 

 

 

 

 

 

 

Limited partners’ interest in net income

 

$

40,885

 

$

24,773

 

$

82,635

 

$

6,267

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

$

1.50

 

$

0.91

 

$

3.03

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

Diluted net income per limited partner unit

 

$

1.50

 

$

0.91

 

$

3.03

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

27,183

 

27,333

 

27,229

 

27,350

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

27,307

 

27,333

 

27,312

 

27,593

 

 

 

 

 

 

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

 

2



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

43,622

 

$

25,136

 

$

88,498

 

$

8,024

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges

 

1,929

 

(945

)

2,800

 

2,577

 

Change in pension liability

 

(595

)

1,191

 

(861

)

3,216

 

Total other comprehensive income

 

1,334

 

246

 

1,939

 

5,793

 

Comprehensive income

 

44,956

 

25,382

 

90,437

 

13,817

 

Comprehensive (income) loss attributable to noncontrolling interest

 

(1,114

)

679

 

(1,699

)

549

 

Comprehensive income attributable to Global Partners LP

 

$

43,842

 

$

26,061

 

$

88,738

 

$

14,366

 

 

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

 

3



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2014

 

2013

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

88,498

 

$

8,024

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

62,753

 

55,534

 

Amortization of deferred financing fees

 

4,187

 

5,062

 

Amortization of senior notes discount

 

435

 

263

 

Bad debt expense

 

996

 

3,030

 

Stock-based compensation expense

 

2,585

 

955

 

Write-off of financing fees

 

1,626

 

 

Disposition of property and equipment and other

 

1,060

 

(1,444

)

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

156,249

 

70,202

 

Accounts receivable – affiliate

 

(2,007

)

(189

)

Inventories

 

117,097

 

237,386

 

Broker margin deposits

 

11,000

 

14,032

 

Prepaid expenses, all other current assets and other assets

 

(24,454

)

18,589

 

Accounts payable

 

(235,370

)

(147,359

)

Trustee taxes payable

 

1,917

 

(15,603

)

Change in fair value of forward fixed price contracts

 

6,443

 

15,472

 

Accrued expenses, all other current liabilities and other long-term liabilities

 

986

 

(9,842

)

Net cash provided by operating activities

 

194,001

 

254,112

 

Cash flows from investing activities

 

 

 

 

 

Acquisitions

 

 

(185,262

)

Capital expenditures

 

(73,591

)

(46,935

)

Proceeds from sale of property and equipment

 

3,405

 

5,769

 

Net cash used in investing activities

 

(70,186

)

(226,428

)

Cash flows from financing activities

 

 

 

 

 

Payments on working capital revolving credit facility

 

(125,000

)

(124,200

)

Payments on revolving credit facility

 

(162,100

)

(22,300

)

Proceeds from issuance of term loan

 

 

115,000

 

Proceeds from senior notes, net of discount

 

258,903

 

67,900

 

Repayment of senior notes

 

(40,244

)

 

Repurchase of common units

 

(4,423

)

 

Repurchased units withheld for tax obligations

 

 

(4,331

)

Noncontrolling interest capital contribution

 

8,400

 

(2,086

)

Distribution to noncontrolling interest

 

(8,400

)

1,425

 

Distributions to partners

 

(54,623

)

(50,001

)

Net cash used in financing activities

 

(127,487

)

(18,593

)

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

(3,672

)

9,091

 

Cash and cash equivalents at beginning of period

 

9,217

 

5,977

 

Cash and cash equivalents at end of period

 

$

5,545

 

$

15,068

 

 

 

 

 

 

 

Supplemental information

 

 

 

 

 

Cash paid during the period for interest

 

$

26,947

 

$

26,002

 

Non-cash exchange of 6.25% senior notes due 2022

 

$

110,000

 

$

 

 

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

 

4



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(In thousands)

(Restated) (Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

General

 

Other

 

 

 

Total

 

 

 

Common

 

Partner

 

Comprehensive

 

Noncontrolling

 

Partners’

 

 

 

Unitholders

 

Interest

 

Loss

 

Interest

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

$

426,785

 

$

(238

)

$

(11,310

)

$

47,943

 

$

463,180

 

Net income

 

82,635

 

4,164

 

 

1,699

 

88,498

 

Noncontrolling interest capital contribution

 

 

 

 

8,400

 

8,400

 

Distribution to noncontrolling interest

 

 

 

 

(8,400

)

(8,400

)

Other comprehensive income

 

 

 

1,939

 

 

1,939

 

Stock-based compensation

 

2,585

 

 

 

 

2,585

 

Distributions to partners

 

(51,434

)

(3,535

)

 

 

(54,969

)

Dividends on repurchased units

 

346

 

 

 

 

346

 

Repurchase of common units

 

(4,423

)

 

 

 

(4,423

)

Balance at September 30, 2014

 

$

456,494

 

$

391

 

$

(9,371

)

$

49,642

 

$

497,156

 

 

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

 

5


 


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 Delaware master limited partnership formed in March 2005.  As of September 30, 2014, the Partnership had the following wholly owned subsidiaries:  Global Companies LLC, Glen Hes Corp., Global Montello Group Corp. (“GMG”), Chelsea Sandwich LLC, Global Energy Marketing LLC, Alliance Energy LLC (“Alliance”), Bursaw Oil LLC, GLP Finance Corp. (“GLP Finance”), Global Energy Marketing II LLC, Global CNG LLC, Cascade Kelly Holdings LLC and Global Partners Energy Canada ULC.  Global GP LLC, the Partnership’s general partner (the “General Partner”) manages the Partnership’s operations and activities and employs its officers and substantially all of its personnel, except for certain of its gasoline station and convenience store employees and certain union personnel who are employed by GMG.

 

The Partnership is a midstream logistics and marketing company.  The Partnership is one of the largest distributors of gasoline (including gasoline blendstocks such as ethanol and naphtha), distillates (such as home heating oil, diesel and kerosene), residual oil and renewable fuels to wholesalers, retailers and commercial customers in the New England states and New York.  The Partnership also engages in the purchasing, selling and logistics of transporting domestic and Canadian crude oil and other products via rail, establishing a “virtual pipeline” from the mid-continent region of the United States and Canada to the East and West Coasts for distribution to refiners and other customers.  The Partnership owns, controls or has access to one of the largest terminal networks of refined petroleum products and renewable fuels in Massachusetts, Maine, Connecticut, Vermont, New Hampshire, Rhode Island, New York, New Jersey and Pennsylvania (collectively, the “Northeast”). The Partnership also owns and controls transload terminals in North Dakota and Oregon that extend its origin-to-destination capabilities. The Partnership is a major multi-brand gasoline distributor and, as of September 30, 2014, had a portfolio of approximately 900 owned, leased and/or supplied gasoline stations primarily in the Northeast.  The Partnership receives revenue from retail sales of gasoline, convenience store sales and gasoline station rental income.  The Partnership is also a distributor of natural gas and propane.

 

On February 1, 2013, the Partnership acquired a 60% membership interest in Basin Transload, LLC (“Basin Transload”), and on February 15, 2013, the Partnership acquired 100% of the membership interests in Cascade Kelly Holdings LLC (“Cascade Kelly”).  See Note 2.

 

The General Partner, which holds a 0.83% general partner interest in the Partnership, is owned by affiliates of the Slifka family.  As of September 30, 2014, affiliates of the General Partner, including its directors and executive officers and their affiliates, owned 11,618,554 common units, representing a 42.4% limited partner interest.

 

Basis of Presentation

 

The financial results of Basin Transload for the eight months ended September 30, 2013 and of Cascade Kelly for the seven and one-half months ended September 30, 2013 are included in the accompanying statements of income for the nine months ended September 30, 2013.  The Partnership consolidates the balance sheet and statement of operations of Basin Transload because the Partnership controls the entity.  The accompanying consolidated financial statements as of September 30, 2014 and December 31, 2013 and for the three and nine months ended September 30, 2014 and 2013 reflect the accounts of the Partnership.  Upon consolidation, all intercompany balances and transactions have been eliminated.

 

6



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1.                     Organization and Basis of Presentation (continued)

 

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, 2013 and notes thereto contained in the Partnership’s Annual Report on Form 10-K.  The significant accounting policies described in Note 2, “Summary of Significant Accounting Policies,” of such Annual Report on Form 10-K are the same used in preparing the accompanying consolidated financial statements.

 

The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2014.  The consolidated balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2013.

 

Due to the nature of the Partnership’s business and its reliance, in part, on consumer travel and spending patterns, the Partnership may experience more demand for gasoline and gasoline blendstocks during the late spring and summer months than during the fall and winter.  Travel and recreational activities are typically higher in these months in the geographic areas in which the Partnership operates, increasing the demand for gasoline and gasoline blendstocks that the Partnership distributes.  Therefore, the Partnership’s volumes in gasoline and gasoline blendstocks are typically higher in the second and third quarters of the calendar year.  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, heating oil and residual oil sales are generally higher during the first and fourth quarters of the calendar year. These factors may result in significant fluctuations in the Partnership’s quarterly operating results.

 

Noncontrolling Interest

 

These financial statements reflect the application of ASC 810, “Consolidations” (“ASC 810”) which establishes accounting and reporting standards that require: (i) the ownership interest in subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within shareholder’s equity, but separate from the parent’s equity; (ii) the amount of consolidated net income attributable to the parent and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statement of income and (iii) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be accounted for consistently.

 

The Partnership acquired a 60% interest in Basin Transload on February 1, 2013.  After evaluating ASC 810, the Partnership concluded it is appropriate to consolidate the balance sheet and statement of income of Basin Transload based on an evaluation of the outstanding voting interests.  Amounts pertaining to the noncontrolling ownership interest held by third parties in the financial position and operating results of the Partnership are reported as a noncontrolling interest in the accompanying consolidated balance sheet and statement of income.

 

7



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1.                     Organization and Basis of Presentation (continued)

 

Concentration of Risk

 

The following table presents the Partnership’s product sales and logistics revenue as a percentage of total sales for the periods presented:

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2014

 

 

2013

 

2014

 

2013

 

Gasoline sales: gasoline and gasoline blendstocks such as ethanol and naphtha

 

65%

 

65%

 

62%

 

59%

 

Crude oil sales and logistics revenue

 

15%

 

18%

 

14%

 

19%

 

Distillates (home heating oil, diesel and kerosene), residual oil, natural gas and propane sales

 

20%

 

17%

 

24%

 

22%

 

Total

 

100%

 

100%

 

100%

 

100%

 

 

The Partnership had one significant customer, ExxonMobil Corporation (“ExxonMobil”), that accounted for approximately 19% and 17% of total sales for the three and nine months ended September 30, 2014, respectively.  The Partnership had two significant customers, ExxonMobil and Phillips 66, which accounted for approximately 18% and 11%, respectively, of total sales for the three months ended September 30, 2013 and approximately 15% and 14%, respectively, of total sales for the nine months ended September 30, 2013.

 

Note 2.                     Business Combinations

 

Acquisition of Basin Transload, LLC

 

On February 1, 2013, the Partnership acquired a 60% membership interest in Basin Transload, which operates two transloading facilities in Columbus and Beulah, North Dakota for crude oil and other products, with a combined rail loading capacity of 160,000 barrels per day.  The purchase price, including expenditures related to certain capital expansion projects, was approximately $91.1 million which the Partnership financed with borrowings under its credit facility.

 

The acquisition was accounted for using the purchase method of accounting in accordance with the Financial Accounting Standards Board’s (“FASB”) guidance regarding business combinations.  The Partnership’s financial statements include the results of operations of its membership interest in Basin Transload subsequent to the acquisition date.

 

The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values.  The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, based upon a valuation from the Partnership’s third-party valuation firm.  Any excess purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill and assigned to the Wholesale reporting unit.

 

8



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 2.                     Business Combinations (continued)

 

As part of the purchase price allocation, identifiable intangible assets include customer relationships that are being amortized, based on the economic use of the asset, over two years which is consistent with the contractual period of the existing customers.  Amortization expense amounted to $2.8 million and $3.0 million for the three months ended September 30, 2014 and 2013, respectively, and $8.3 million and $8.0 million for the nine months ended September 30, 2014 and 2013, respectively.  The following table presents the estimated remaining amortization expense for intangible assets acquired in connection with the acquisition (in thousands):

 

2014 (10/1/14-12/31/14)

 

$

2,755

 

2015

 

2,869

 

Total

 

$

5,624

 

 

Acquisition of Cascade Kelly Holdings LLC

 

On February 15, 2013, the Partnership acquired 100% of the membership interests in Cascade Kelly, which owns a West Coast crude oil and ethanol facility in Clatskanie, Oregon.  The total cash purchase price was approximately $94.2 million which the Partnership funded with borrowings under its credit facility and with proceeds from the issuance of the Partnership’s unsecured 8.0% senior notes due 2018 (see Note 6).  Cascade Kelly’s assets include a rail transloading facility serviced by the Burlington Northern Santa Fe Railway, 200,000 barrels of storage capacity, a deepwater marine terminal with access to a 1,200-foot leased dock and the largest ethanol plant on the West Coast.  Situated along the Columbia River in Clatskanie, Oregon, the site is located on land leased under a long-term agreement from the Port of St. Helens.

 

The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance regarding business combinations.  The Partnership’s financial statements include the results of operations of Cascade Kelly subsequent to the acquisition date.

 

The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values.  The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, if any, based upon on a valuation from the Partnership’s third-party valuation firm.  No intangible assets were identified.  Any excess purchase price over the fair value of the net tangible assets acquired was allocated to goodwill and assigned to the Wholesale reporting unit.

 

Supplemental Pro Forma Information

 

Revenues and net income included in the Partnership’s consolidated operating results for Basin Transload from January 1, 2013 to February 1, 2013, the acquisition date, and for Cascade Kelly from January 1, 2013 to February 15, 2013, the acquisition date, were immaterial.  Accordingly, the supplemental pro forma information for the nine months ended September 30, 2013 is consistent with the amounts reported in the accompanying statement of income for the nine months ended September 30, 2013.

 

Note 3.                     Net Income Per Limited Partner Unit

 

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 common unitholders, or limited partners’ interest, and to the General Partner’s general partner interest.

 

9



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 3.                     Net Income Per Limited Partner Unit (continued)

 

Common units outstanding as reported in the accompanying consolidated financial statements at September 30, 2014 and December 31, 2013 excluded 279,125 and 169,816 common units, respectively, held on behalf of the Partnership pursuant to its repurchase program.  These units are not deemed outstanding for purposes of calculating net income per limited partner unit (basic and diluted).

 

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 nine months ended September 30, 2014 and 2013 (in thousands, except per unit data):

 

 

 

Three Months Ended September 30, 2014

 

 

Three Months Ended September 30, 2013

 

Numerator:

 

Total

 

Limited
Partner
Interest

 

General
Partner
Interest

 

IDRs

 

 

Total

 

Limited
Partner
Interest

 

General
Partner
Interest

 

IDRs

 

Net income attributable to Global Partners LP

 

$

42,508

 

$

40,885

 

$

1,623

 

$

 

 

$

25,815

 

$

24,773

 

$

1,042

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

19,319

 

$

17,899

 

$

150

 

$

1,270

 

 

$

17,425

 

$

16,459

 

$

138

 

$

828

 

Assumed allocation of undistributed net income

 

23,189

 

22,986

 

203

 

 

 

8,390

 

8,314

 

76

 

 

Assumed allocation of net income

 

$

42,508

 

$

40,885

 

$

353

 

$

1,270

 

 

$

25,815

 

$

24,773

 

$

214

 

$

828

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

27,183

 

 

 

 

 

 

 

 

27,333

 

 

 

 

 

Dilutive effect of phantom units

 

 

 

124

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

27,307

 

 

 

 

 

 

 

 

27,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

 

$

1.50

 

 

 

 

 

 

 

 

$

0.91

 

 

 

 

 

Diluted net income per limited partner unit (1)

 

 

 

$

1.50

 

 

 

 

 

 

 

 

$

0.91

 

 

 

 

 

 

(1)   Basic units were used to calculate diluted net income per limited partner unit for the three months ended September 30, 2013, as using the effects of phantom units would have an anti-dilutive effect on income per limited partner unit.

 

10



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 3.                     Net Income Per Limited Partner Unit (continued)

 

 

 

Nine Months Ended September 30, 2014

 

 

Nine Months Ended September 30, 2013

 

Numerator: 

 

Total

 

Limited
Partner
Interest

 

General
Partner
Interest

 

IDRs

 

 

Total

 

Limited
Partner
Interest

 

General
Partner
Interest

 

IDRs

 

Net income attributable to Global Partners LP

 

$

86,799

 

$

82,635

 

$

4,164

 

$

 

 

$

8,573

 

$

6,267

 

$

2,306

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

56,414

 

$

52,531

 

$

439

 

$

3,444

 

 

$

51,196

 

$

48,554

 

$

407

 

$

2,235

 

Assumed allocation of undistributed net income

 

30,385

 

30,104

 

281

 

 

 

(42,623

)

(42,287

)

(336

)

 

Assumed allocation of net income

 

$

86,799

 

$

82,635

 

$

720

 

$

3,444

 

 

$

8,573

 

$

6,267

 

$

71

 

$

2,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

27,229

 

 

 

 

 

 

 

27,350

 

 

 

 

 

Dilutive effect of phantom units

 

 

83

 

 

 

 

 

 

 

243

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

27,312

 

 

 

 

 

 

 

27,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

$

3.03

 

 

 

 

 

 

 

$

0.23

 

 

 

 

 

Diluted net income per limited partner unit

 

 

$

3.03

 

 

 

 

 

 

 

$

0.23

 

 

 

 

 

 

On April 23, 2014, the board of directors of the General Partner declared a quarterly cash distribution of $0.6250 per unit for the period from January 1, 2014 through March 31, 2014. On July 23, 2014, the board of directors of the General Partner declared a quarterly cash distribution of $0.6375 per unit for the period from April 1, 2014 through June 30, 2014. On October 22, 2014, the board of directors of the General Partner declared a quarterly cash distribution of $0.6525 per unit for the period from July 1, 2014 through September 30, 2014. These declared cash distributions result in incentive distributions to the General Partner, as the holder of the IDRs, and enable the Partnership to exceed its second target level distribution with respect to such IDRs. See Note 8, “Cash Distributions” for further information.

 

11



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 4.                     Inventories

 

Except for its convenience store inventory and its Renewable Identification Numbers (“RINs”) inventory, the Partnership hedges substantially all of its inventory using a variety of instruments, primarily futures contracts. These futures contracts are entered into when inventory is purchased and are either designated as fair value hedges against the inventory on a specific barrel basis for inventories qualifying for fair value hedge accounting or not designated and maintained as economic hedges against certain inventory of the Partnership on a specific barrel basis. Changes in the fair value of these futures contracts, as well as the offsetting gain or loss on the designated hedged inventory item, are recognized in earnings as an increase or decrease in cost of sales. All hedged inventory not designated in a fair value hedge relationship is valued using the lower of cost, as determined by specific identification, or market, as determined at the product level. 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. Convenience store inventory and RIN inventory are carried at the lower of historical cost or market.

 

Inventories consisted of the following (in thousands):

 

 

 

September 30,

 

December 31,

 

 

 

2014

 

2013

 

Distillates: home heating oil, diesel and kerosene

 

$

208,578

 

$

272,760

 

Gasoline

 

98,260

 

96,539

 

Gasoline blendstocks

 

64,104

 

54,076

 

Renewable identification numbers (RINs)

 

2,012

 

3,186

 

Crude oil

 

29,884

 

87,022

 

Residual oil

 

40,059

 

48,793

 

Propane and other

 

4,250

 

3,443

 

Convenience store inventory

 

8,562

 

6,987

 

Total

 

$

455,709

 

$

572,806

 

 

In addition to its own inventory, the Partnership has exchange agreements for petroleum products 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 $11.7 million and $48.2 million at September 30, 2014 and December 31, 2013, respectively. Negative exchange balances are accounted for as accounts payable and amounted to $24.2 million and $46.7 million at September 30, 2014 and December 31, 2013, respectively. Exchange transactions are valued using current carrying costs and have no income statement impact.

 

Note 5.                     Derivative Financial Instruments

 

Accounting and reporting guidance for derivative instruments and hedging activities 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. The Partnership principally uses derivative instruments to hedge the commodity risk associated with its inventory and product purchases and sales and to hedge variable interest rates associated with the Partnership’s credit facilities.

 

12



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 September 30, 2014:

 

 

 

Units (1)

 

Unit of Measure

 

Futures Contracts

 

 

 

 

 

Long

 

23,796

 

Thousands of barrels

 

Short

 

(27,842

)

Thousands of barrels

 

 

 

 

 

 

 

Natural Gas Contracts

 

 

 

 

 

Long

 

9,539

 

Thousands of decatherms

 

Short

 

(9,539

)

Thousands of decatherms

 

 

 

 

 

 

 

Interest Rate Swaps

 

$

200.0

 

Millions of U.S. dollars

 

Interest Rate Cap

 

$

100.0

 

Millions of U.S. 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 daily cash settlements under the contracts.

 

Fair Value Hedges

 

The Partnership enters into futures contracts in the normal course of business to reduce the risk of loss of inventory value, which could result from fluctuations in market prices. These futures contracts are designated as fair value hedges against the inventory with specific futures contracts matched to specific barrels of inventory. As a result of the Partnership’s hedge designation on these transactions, the futures contracts are recorded on the Partnership’s consolidated balance sheet and marked to market through the use of independent markets based on the prevailing market prices of such instruments at the date of valuation. Likewise, the underlying inventory being hedged is also marked to market. Changes in the fair value of the futures contracts, as well as the change in the fair value of the hedged inventory, are recognized in the consolidated statement of income through cost of sales. These futures contracts are settled on a daily basis by the Partnership through brokerage margin accounts.

 

The Partnership’s futures contracts are settled daily; therefore, there was no corresponding asset or liability on the Partnership’s consolidated balance sheet related to these contracts at September 30, 2014 and December 31, 2013. These contracts remain open until their contract end date. The daily settlement of these futures contracts is accomplished through the use of brokerage margin deposit accounts.

 

13



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 5.                     Derivative Financial Instruments (continued)

 

The following table presents the hedge ineffectiveness from derivatives involved in fair value hedging relationships recognized in the Partnership’s consolidated statements of income for the three and nine months ended September 30, 2014 and 2013 (in thousands):

 

 

 

 

 

Amount of Gain (Loss) Recognized in

 

 

 

 

 

Income on Derivatives

 

 

 

Location of Gain (Loss)

 

Three Months Ended

 

Nine Months Ended

 

Derivatives in Fair Value

 

Recognized in

 

September 30,

 

September 30,

 

Hedging Relationships

 

Income on Derivative

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Futures contracts

 

Cost of sales

 

$

29,470

 

$

(4,348

)

$

52,050

 

$

15,753

 

 

 

 

 

 

 

Amount of Gain (Loss) Recognized in

 

 

 

 

 

Income on Hedged Items

 

 

 

Location of Gain (Loss)

 

Three Months Ended

 

Nine Months Ended

 

Hedged Items in Fair Value

 

Recognized in

 

September 30,

 

September 30,

 

Hedged Relationships

 

Income on Hedged Items

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Inventories

 

Cost of sales

 

$

(30,890

)

$

4,545

 

$

(52,386

)

$

(15,033

)

 

Cash Flow Hedges

 

The Partnership utilizes various interest rate derivative instruments to hedge variable interest rates on its debt. These derivative instruments are designated as cash flow hedges of the underlying debt. To the extent such hedges are effective, the changes in the fair value of the derivative instrument are reported as a component of other comprehensive income (loss) and reclassified into interest expense or interest income in the same period during which the hedged transaction affects earnings.

 

In October 2009, the Partnership executed an interest rate swap with a major financial institution. The swap, which became effective on May 16, 2011 and expires on May 16, 2016, is used to hedge the variability in interest payments due to changes in the one-month LIBOR swap curve with respect to $100.0 million of one-month LIBOR-based borrowings on the credit facility at a fixed rate of 3.93%.

 

In April 2011, the Partnership executed an interest rate cap with a major financial institution. The rate cap, which became effective on April 13, 2011 and expires on April 13, 2016, is used to hedge the variability in interest payments due to changes in the one-month LIBOR rate above 5.5% with respect to $100.0 million of one-month LIBOR-based borrowings on the credit facility.

 

In September 2013, the Partnership executed an interest rate swap with a major financial institution. The swap, which became effective on October 2, 2013 and expires on October 2, 2018, is used to hedge the variability in cash flows in monthly interest payments due to changes in the one-month LIBOR swap curve with respect to $100.0 million of one-month LIBOR-based borrowings on the credit facility at a fixed rate of 1.819%.

 

In the aggregate, these hedging instruments historically have hedged the variability in interest payments due to changes in the one-month LIBOR swap curve or rate with respect to $300.0 million of one-month LIBOR-based borrowings on the credit facility.

 

14



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 5.                     Derivative Financial Instruments (continued)

 

In June 2014 and as a result of the issuance of the Partnership’s $375.0 million aggregate principal amount of its 6.25% senior notes due 2022 (see Note 6), the Partnership determined that maintaining an excess of $300.0 million in principal of outstanding floating-rate debt is no longer probable. Therefore, the Partnership elected to de-designate its interest rate cap and discontinued the related hedge accounting for this instrument. Accordingly, at September 30, 2014, the Partnership had in place two interest rate swap agreements which are hedging $200.0 million of variable rate debt, both of which continue to be accounted for as cash flow hedges. The interest rate cap is not currently in a hedging relationship. Accordingly, all changes in the fair value of this instrument are recorded in earnings.

 

The following table presents the fair value of the Partnership’s derivative instruments involved in cash flow hedging relationships and their location in the Partnership’s consolidated balance sheets at September 30, 2014 and December 31, 2013 (in thousands):

 

 

 

 

 

September 30,

 

December 31,

 

Derivatives Designated as

 

 

 

2014

 

2013

 

Hedging Instruments

 

Balance Sheet Location

 

Fair Value

 

Fair Value

 

 

 

 

 

 

 

 

 

Asset derivatives

 

 

 

 

 

 

 

Interest rate cap (1)

 

Other assets

 

$

N/A

 

$

 25

 

 

 

 

 

 

 

 

 

Liability derivatives

 

 

 

 

 

 

 

Interest rate swaps

 

Other long-term liabilities

 

$

 6,927

 

$

 9,462

 

 

(1)   The interest rate cap agreement was de-designated as a cash flow hedge in June 2014.

 

The following table presents the amount of net gains and losses from derivatives involved in cash flow hedging relationships recognized in the Partnership’s consolidated statements of income and partners’ equity for the three and nine months ended September 30, 2014 and 2013 (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

 

 

 

on Derivatives

 

Testing)

 

on Derivatives

 

Testing)

 

Derivatives in

 

Three Months Ended

 

Three Months Ended

 

Nine Months Ended

 

Nine Months Ended

 

Cash Flow

 

September 30,

 

September 30,

 

September 30,

 

September 30,

 

Hedging Relationship

 

2014

 

2013

 

2014

 

2013

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate collar

 

$

 

$

635

 

$

 

$

 

$

 

$

1,861

 

$

 

$

 

Interest rate swaps

 

1,824

 

(1,538

)

 

 

2,535

 

701

 

 

 

Interest rate cap (1)

 

105

 

(42

)

 

 

265

 

15

 

 

 

Total

 

$

1,929

 

$

(945

)

$

 

$

 

$

2,800

 

$

2,577

 

$

 

$

 

 

(1)   The interest rate cap agreement was de-designated as a cash flow hedge in June 2014.

 

Ineffectiveness related to the interest rate swaps, collar and cap is recognized as interest expense and was immaterial for the three and nine months ended September 30, 2014 and 2013. In June 2014, the Partnership elected to de-designate its interest rate cap and discontinued hedge accounting. Except for the amortization of the prepaid interest rate caplets associated with the interest rate cap, totaling $96,000 and $273,000 for the three and nine months ended September 30, 2014, respectively, there were no amounts reclassified into earnings for the three and nine months ended September 30, 2014 and 2013 under these instruments. The change in the fair value of the interest rate cap following de-designation is reflected in earnings and was immaterial for the three months ended September 30, 2014.

 

As of September 30, 2014, the remaining unamortized prepaid interest rate caplets were $1.1 million and will be amortized over the remaining life of the interest rate cap which expires in April 2016.

 

15



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 5.                     Derivative Financial Instruments (continued)

 

Other Derivative Activity

 

The Partnership uses futures contracts, and occasionally swap agreements, to hedge its commodity exposure under forward fixed price purchase and sale commitments on its products and certain inventory of the Partnership. These derivatives are not designated by the Partnership as either fair value hedges or cash flow hedges. Rather, the forward fixed price purchase and sales commitments, which meet the definition of a derivative, are reflected in the Partnership’s consolidated balance sheet. The related futures contracts (and swaps, if applicable) are also reflected in the Partnership’s consolidated balance sheet, thereby creating an economic hedge. Changes in the fair value of the futures contracts (and swaps, if applicable), as well as offsetting gains or losses due to the change in the fair value of forward fixed price purchase and sale commitments, are recognized in the consolidated statement of income through cost of sales. These futures contracts are settled on a daily basis by the Partnership through brokerage margin accounts.

 

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 other logistical issues inherent in the business, such as weather conditions. In connection with managing these positions, maintaining a constant presence in the marketplace and managing the futures market outlook for future anticipated inventories, which are necessary for its business, the Partnership engages in a controlled trading program for up to an aggregate of 250,000 barrels of products at any one point in time. Any derivatives not involved in a direct hedging activity are marked to market and recognized in the consolidated statement of income through cost of sales.

 

The Partnership also markets and sells natural gas by entering into forward purchase commitments for natural gas when it enters into arrangements for the forward sale commitment of product for physical delivery to third-party users. The Partnership reflects the fair value of forward fixed purchase and sales commitments in its consolidated balance sheet. Changes in the fair value of the forward fixed price purchase and sale commitments are recognized in the consolidated statement of income through cost of sales.

 

During the three and nine months ended September 30, 2014 and 2013, the Partnership entered into forward currency contracts to hedge certain foreign denominated (Canadian) product purchases. These forward contracts are not designated and are reflected in the consolidated balance sheets. Changes in the fair values of these forward currency contracts are reflected in cost of sales.

 

Similar to the futures contracts used by the Partnership to hedge its inventory, the Partnership uses future contracts to economically hedge forward purchase and sale contracts for which the Partnership does not take the normal purchase and sale exemption. Additionally, these futures contracts are settled daily and, accordingly, there was no corresponding asset or liability in the Partnership’s consolidated balance sheets related to these contracts at September 30, 2014 and December 31, 2013. These contracts remain open until their contract end date. The daily settlement of these futures contracts is accomplished through the use of brokerage margin deposit accounts.

 

16



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 5.                     Derivative Financial Instruments (continued)

 

The following table summarizes the derivatives not designated by the Partnership as either fair value hedges or cash flow hedges and their respective fair values and location in the Partnership’s consolidated balance sheets at September 30, 2014 and December 31, 2013 (in thousands):

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

 

 

Balance Sheet

 

2014

 

2013

 

Summary of Other Derivatives

 

Item Pertains to

 

Location

 

Fair Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

Asset Derivatives

 

 

 

 

 

 

 

 

 

Forward purchase commitments

 

Gasoline and Gasoline Blendstocks

 

(1)

 

$

 1,035

 

$

 14,119

 

 

 

Distillates

 

(1)

 

2,219

 

2,232

 

 

 

Crude Oil

 

(1)

 

3,546

 

13,693

 

 

 

Propane

 

(1)

 

35

 

 

 

 

Residual Oil

 

(1)

 

20

 

34

 

Total forward purchase commitments

 

 

 

 

 

6,855

 

30,078

 

 

 

 

 

 

 

 

 

 

 

Forward sales commitments

 

Gasoline and Gasoline Blendstocks

 

(1)

 

16,537

 

1,486

 

 

 

Distillates

 

(1)

 

17,063

 

797

 

 

 

Residual Oil

 

(1)

 

1,573

 

655

 

 

 

Crude Oil

 

(1)

 

9,919

 

383

 

 

 

Natural Gas

 

(1)

 

4,736

 

12,608

 

 

 

Propane

 

(1)

 

438

 

 

Total forward sales commitments

 

 

 

 

 

50,266

 

15,929

 

Total fair value of forward fixed price contracts

 

 

 

 

 

$

 57,121

 

$

 46,007

 

 

 

 

 

 

 

 

 

 

 

Liability Derivatives

 

 

 

 

 

 

 

 

 

Forward purchase commitments

 

Gasoline and Gasoline Blendstocks

 

(2)

 

$

 9,019

 

$

 3,625

 

 

 

Distillates

 

(2)

 

9,627

 

1,396

 

 

 

Residual Oil

 

(2)

 

 

990

 

 

 

Crude Oil

 

(2)

 

16,003

 

2,122

 

 

 

Natural Gas

 

(2)

 

4,737

 

12,485

 

 

 

Propane

 

(2)

 

331

 

 

Total forward purchase commitments

 

 

 

 

 

39,717

 

20,618

 

 

 

 

 

 

 

 

 

 

 

Forward sales commitments

 

Gasoline and Gasoline Blendstocks

 

(2)

 

77

 

10,709

 

 

 

Distillates

 

(2)

 

109

 

3,809

 

 

 

Crude Oil

 

(2)

 

15,842

 

3,061

 

 

 

Propane

 

(2)

 

9

 

 

Total forward sales commitments

 

 

 

 

 

16,037

 

17,579

 

Total obligations on forward fixed price contracts and other derivatives

 

 

 

 

 

55,754

 

38,197

 

 

 

 

 

 

 

 

 

 

 

Foreign currency forward contract

 

Foreign Denominated Sales

 

(3)

 

 

16

 

Total liability derivatives

 

 

 

 

 

$

 55,754

 

$

 38,213

 

 

(1)          Fair value of forward fixed price contracts

(2)          Obligations on forward fixed price contracts

(3)          Accrued expenses and other current liabilities

 

17



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 not involved in a fair value hedging relationship or in a hedging relationship recognized in the Partnership’s consolidated statements of income for the three and nine months ended September 30, 2014 and 2013 (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

 

Nine Months Ended

 

Derivatives Not Designated as

 

Income on

 

September 30,

 

September 30,

 

Hedging Instruments

 

Derivatives

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Product contracts

 

Cost of sales

 

$

10,708

 

$

4,576

 

$

14,196

 

$

8,223

 

Foreign currency contracts

 

Cost of sales

 

171

 

(437

)

17

 

(203

)

Total

 

 

 

$

10,879

 

$

4,139

 

$

14,213

 

$

8,020