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GLOBAL PARTNERS LP 10-Q 2017

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
glp_Current folio_10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q

 


 

(Mark One)

 

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

 

 

For the quarterly period ended March 31, 2017

 

 

OR

 

 

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 ☒ No ☐

 

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 ☒ No ☐

 

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

 

 

 

 

 

Large accelerated filer  ☐

 

 

Accelerated filer  ☒

Non-accelerated filer  ☐

(Do not check if a smaller reporting company)

 

Smaller reporting company  ☐

 

 

 

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

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

 

The issuer had 33,995,563 common units outstanding as of May 4, 2017.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I.     FINANCIAL INFORMATION

 

 

 

 

 

Item 1.     Financial Statements (unaudited) 

 

3

 

 

 

Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 

 

3

 

 

 

Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016  

 

4

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2017 and 2016 

 

5

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 

 

6

 

 

 

Consolidated Statement of Partners’ Equity for the three months ended March 31, 2017 

 

7

 

 

 

Notes to Consolidated Financial Statements 

 

8

 

 

 

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

 

45

 

 

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk 

 

68

 

 

 

Item 4.     Controls and Procedures 

 

70

 

 

 

PART II.     OTHER INFORMATION 

 

71

 

 

 

Item 1.     Legal Proceedings 

 

71

 

 

 

Item 1A.   Risk Factors 

 

73

 

 

 

Item 6.     Exhibits 

 

73

 

 

 

SIGNATURES 

 

74

 

 

 

INDEX TO EXHIBITS 

 

75

 

 

 

 

 


 

Item 1.Financial Statements

 

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

    

2017

    

2016

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

14,126

 

$

10,028

 

 

Accounts receivable, net

 

 

312,314

 

 

421,360

 

 

Accounts receivable—affiliates

 

 

2,957

 

 

3,143

 

 

Inventories

 

 

433,952

 

 

521,878

 

 

Brokerage margin deposits

 

 

18,886

 

 

27,653

 

 

Derivative assets

 

 

2,720

 

 

21,382

 

 

Prepaid expenses and other current assets

 

 

71,110

 

 

70,022

 

 

Total current assets

 

 

856,065

 

 

1,075,466

 

 

Property and equipment, net

 

 

1,074,465

 

 

1,099,899

 

 

Intangible assets, net

 

 

62,443

 

 

65,013

 

 

Goodwill

 

 

292,773

 

 

294,768

 

 

Other assets

 

 

42,583

 

 

28,874

 

 

Total assets

 

$

2,328,329

 

$

2,564,020

 

 

Liabilities and partners’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

232,125

 

$

320,262

 

 

Working capital revolving credit facility—current portion

 

 

176,900

 

 

274,600

 

 

Environmental liabilities—current portion

 

 

5,339

 

 

5,341

 

 

Trustee taxes payable

 

 

98,955

 

 

101,166

 

 

Accrued expenses and other current liabilities

 

 

59,171

 

 

70,443

 

 

Derivative liabilities

 

 

4,986

 

 

27,413

 

 

Total current liabilities

 

 

577,476

 

 

799,225

 

 

Working capital revolving credit facility—less current portion

 

 

150,000

 

 

150,000

 

 

Revolving credit facility

 

 

200,700

 

 

216,700

 

 

Senior notes

 

 

659,805

 

 

659,150

 

 

Environmental liabilities—less current portion

 

 

55,105

 

 

57,724

 

 

Financing obligations

 

 

152,466

 

 

152,444

 

 

Deferred tax liabilities

 

 

65,296

 

 

66,054

 

 

Other long-term liabilities

 

 

62,173

 

 

64,882

 

 

Total liabilities

 

 

1,923,021

 

 

2,166,179

 

 

Partners’ equity

 

 

 

 

 

 

 

 

Global Partners LP equity:

 

 

 

 

 

 

 

 

Common unitholders 33,995,563 units issued and 33,554,328 outstanding at March 31, 2017 and 33,995,563 units issued and 33,543,669 outstanding at December 31, 2016)

 

 

408,187

 

 

401,044

 

 

General partner interest (0.67% interest with 230,303 equivalent units outstanding at March 31, 2017 and December 31, 2016)

 

 

(2,900)

 

 

(2,948)

 

 

Accumulated other comprehensive loss

 

 

(4,724)

 

 

(5,441)

 

 

Total Global Partners LP equity

 

 

400,563

 

 

392,655

 

 

Noncontrolling interest

 

 

4,745

 

 

5,186

 

 

Total partners’ equity

 

 

405,308

 

 

397,841

 

 

Total liabilities and partners’ equity

 

$

2,328,329

 

$

2,564,020

 

 

 

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

3


 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

    

 

 

March 31,

 

 

    

2017

      

2016

    

Sales

 

$

2,270,784

 

$

1,750,812

 

Cost of sales

 

 

2,130,757

 

 

1,620,753

 

Gross profit

 

 

140,027

 

 

130,059

 

Costs and operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

36,787

 

 

34,984

 

Operating expenses

 

 

67,213

 

 

72,236

 

Amortization expense

 

 

2,261

 

 

2,509

 

Net (gain) loss on sale and disposition of assets

 

 

(11,862)

 

 

6,105

 

Total costs and operating expenses

 

 

94,399

 

 

115,834

 

Operating income

 

 

45,628

 

 

14,225

 

Interest expense

 

 

(23,287)

 

 

(22,980)

 

Income (loss) before income tax benefit

 

 

22,341

 

 

(8,755)

 

Income tax benefit

 

 

164

 

 

920

 

Net income (loss)

 

 

22,505

 

 

(7,835)

 

Net loss attributable to noncontrolling interest

 

 

441

 

 

811

 

Net income (loss) attributable to Global Partners LP

 

 

22,946

 

 

(7,024)

 

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

 

 

154

 

 

(47)

 

Limited partners’ interest in net income (loss)

 

$

22,792

 

$

(6,977)

 

Basic net income (loss) per limited partner unit

 

$

0.68

 

$

(0.21)

 

Diluted net income (loss) per limited partner unit

 

$

0.68

 

$

(0.21)

 

Basic weighted average limited partner units outstanding

 

 

33,554

 

 

33,517

 

Diluted weighted average limited partner units outstanding

 

 

33,610

 

 

33,517

 

 

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

4


 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2017

    

2016

    

 

Net income (loss)

 

$

22,505

 

$

(7,835)

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges

 

 

398

 

 

261

 

 

Change in pension liability

 

 

319

 

 

68

 

 

Total other comprehensive income

 

 

717

 

 

329

 

 

Comprehensive income (loss)

 

 

23,222

 

 

(7,506)

 

 

Comprehensive loss attributable to noncontrolling interest

 

 

441

 

 

811

 

 

Comprehensive income (loss) attributable to Global Partners LP

 

$

23,663

 

$

(6,695)

 

 

 

 

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

 

5


 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

6

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

    

2017

    

2016

    

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income (loss)

 

$

22,505

 

$

(7,835)

 

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,364

 

 

28,669

 

 

Amortization of deferred financing fees

 

 

1,535

 

 

1,429

 

 

Amortization of leasehold interests

 

 

310

 

 

313

 

 

Amortization of senior notes discount

 

 

356

 

 

343

 

 

Bad debt expense

 

 

752

 

 

50

 

 

Unit-based compensation expense

 

 

(117)

 

 

1,075

 

 

Write-off of financing fees

 

 

 —

 

 

1,828

 

 

Net (gain) loss on sale and disposition of assets

 

 

(11,862)

 

 

6,105

 

 

Changes in operating assets and liabilities, excluding net assets acquired:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

108,294

 

 

2,945

 

 

Accounts receivable-affiliate

 

 

186

 

 

(904)

 

 

Inventories

 

 

87,379

 

 

(13,920)

 

 

Broker margin deposits

 

 

8,767

 

 

(7,528)

 

 

Prepaid expenses, all other current assets and other assets

 

 

(16,017)

 

 

(9,952)

 

 

Accounts payable

 

 

(88,137)

 

 

(47,982)

 

 

Trustee taxes payable

 

 

(2,211)

 

 

(7,259)

 

 

Change in derivatives

 

 

(5,256)

 

 

16,714

 

 

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

 

 

(15,283)

 

 

(17,607)

 

 

Net cash provided by (used in) operating activities

 

 

117,565

 

 

(53,516)

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(8,378)

 

 

(16,451)

 

 

Proceeds from sale of property and equipment

 

 

24,249

 

 

8,588

 

 

Net cash provided by (used in) investing activities

 

 

15,871

 

 

(7,863)

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Net (payments on) borrowings from working capital revolving credit facility

 

 

(97,700)

 

 

87,100

 

 

Net (payments on) borrowings from revolving credit facility

 

 

(16,000)

 

 

6,100

 

 

Noncontrolling interest capital contribution

 

 

 —

 

 

357

 

 

Distribution to noncontrolling interest

 

 

 —

 

 

(595)

 

 

Distributions to partners

 

 

(15,638)

 

 

(15,630)

 

 

Net cash (used in) provided by financing activities

 

 

(129,338)

 

 

77,332

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

4,098

 

 

15,953

 

 

Cash and cash equivalents at beginning of period

 

 

10,028

 

 

1,116

 

 

Cash and cash equivalents at end of period

 

$

14,126

 

$

17,069

 

 

Supplemental information

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

17,265

 

$

17,232

 

 

 

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

6


 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

    

 

 

    

General

    

Other

    

 

 

    

Total

 

 

 

Common

 

Partner

 

Comprehensive

 

Noncontrolling

 

Partners’

 

 

 

Unitholders

 

Interest

 

Loss

 

Interest

 

Equity

 

Balance at December 31, 2016

 

$

401,044

 

$

(2,948)

 

$

(5,441)

 

$

5,186

 

$

397,841

 

Net income (loss)

 

 

22,792

 

 

154

 

 

 —

 

 

(441)

 

 

22,505

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

717

 

 

 —

 

 

717

 

Unit-based compensation

 

 

(117)

 

 

 —

 

 

 —

 

 

 —

 

 

(117)

 

Distributions to partners

 

 

(15,723)

 

 

(106)

 

 

 —

 

 

 —

 

 

(15,829)

 

Dividends on repurchased units

 

 

191

 

 

 —

 

 

 —

 

 

 —

 

 

191

 

Balance at March 31, 2017

 

$

408,187

 

$

(2,900)

 

$

(4,724)

 

$

4,745

 

$

405,308

 

 

 

 

 

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

 

 

 

7


 

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 midstream logistics and marketing master limited partnership formed in March 2005 engaged in the purchasing, selling, storing and logistics of transporting petroleum and related products, including gasoline and gasoline blendstocks (such as ethanol), distillates (such as home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil and propane.  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 is one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in the New England states and New York.  The Partnership is also one of the largest independent owners, suppliers and operators of gasoline stations and convenience stores with locations throughout the New England states and New York.  As of March 31, 2017, the Partnership had a portfolio of 1,445 owned, leased and/or supplied gasoline stations, including 243 directly operated convenience stores, in the Northeast, Maryland and Virginia.  The Partnership also receives revenue from convenience store sales and gasoline station rental income.  In addition, the Partnership owns transload and storage terminals in North Dakota and Oregon that extend its origin-to-destination capabilities from the mid-continent region of the United States and Canada.

 

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 most of its gasoline station and convenience store employees who are employed by Global Montello Group Corp. (“GMG”), a wholly owned subsidiary of the Partnership.

 

The General Partner, which holds a 0.67% general partner interest in the Partnership, is owned by affiliates of the Slifka family.  As of March 31, 2017, affiliates of the General Partner, including its directors and executive officers and their affiliates, owned 7,433,829 common units, representing a 21.9% limited partner interest.

 

Recent Transactions

 

Amended and Restated Credit Agreement—  On April 25, 2017, the Partnership and certain of its subsidiaries entered into a third amended and restated credit agreement with aggregate commitments of $1.3 billion and a maturity date of April 30, 2020.  See Note 7 for additional information.

 

Potential Sale of Terminal Assets—On February 2, 2017, the Partnership began soliciting proposals for the potential sale of six refined petroleum products terminals located in New England, New York and Pennsylvania.  The assets consist of product terminals that represent 1.1 million barrels of aggregate storage capacity.  These assets did not meet the criteria to be presented as held for sale as of March 31, 2017.

 

Sale of Natural Gas and Electricity Brokerage BusinessesOn February 1, 2017, the Partnership completed the sale of its natural gas marketing and electricity brokerage businesses for a purchase price of approximately $17.3 million, subject to customary closing adjustments.  Proceeds from the sale amounted to approximately $16.3 million, and the Partnership realized a gain on the sale of $14.2 million.  The sale of the natural gas marketing and electricity brokerage businesses reflects the Partnership’s ongoing program to monetize non-strategic assets not fundamental to its growth strategy.  Prior to the sale, the results of natural gas marketing and electricity brokerage businesses were included in the Commercial segment.  See Note 6.

 

8


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Basis of Presentation

 

The accompanying consolidated financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016 reflect the accounts of the Partnership.  Upon consolidation, 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, 2016 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 months ended March 31, 2017 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2017.  The consolidated balance sheet at December 31, 2016 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, 2016.

 

Noncontrolling Interest

 

The Partnership acquired a 60% interest in Basin Transload, LLC (“Basin Transload”) on February 1, 2013.  After evaluating Accounting Standards Codification (“ASC”) Topic 810, “Consolidations,” the Partnership concluded it is appropriate to consolidate the balance sheet and statements of operations 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 sheets and statements of operations.

 

Concentration of Risk

 

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 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.  Therefore, the Partnership’s volumes in gasoline 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 volumes are generally higher during the first and fourth quarters of the calendar year.  These factors may result in fluctuations in the Partnership’s quarterly operating results.

 

9


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the Partnership’s product sales and other revenues as a percentage of the consolidated sales for the periods presented:

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

    

2017

    

2016

    

Gasoline sales: gasoline and gasoline blendstocks (such as ethanol)

 

59

%  

57

%  

Crude oil sales and crude oil logistics revenue

 

 5

%  

 8

%  

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

 

33

%  

30

%  

Convenience store sales, rental income and sundry sales

 

 3

%  

 5

%  

Total

 

100

%  

100

%  

 

The following table presents the Partnership’s product margin by segment as a percentage of the consolidated product margin for the periods presented:

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

    

2017

    

2016

    

Wholesale segment

 

32

%  

25

%

Gasoline Distribution and Station Operations segment

 

65

%  

70

%

Commercial segment

 

 3

%  

 5

%

Total

 

100

%  

100

%

 

See Note 15, “Segment Reporting,” for additional information on the Partnership’s operating segments.

 

None of the Partnership’s customers accounted for greater than 10% of total sales for the three months ended March 31, 2017 and 2016.

 

 

 

 

 

Note 2.    Net Income (Loss) 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 or losses is assumed to be allocated to the common unitholders, or limited partners’ interest, and to the General Partner’s general partner interest.

 

Common units outstanding as reported in the accompanying consolidated financial statements at March 31, 2017 and December 31, 2016 excluded 441,235 and 451,894 common units, respectively, held on behalf of the Partnership pursuant to its repurchase program (see Note 12).  These units are not deemed outstanding for purposes of calculating net income (loss) per limited partner unit (basic and diluted).

 

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table provides a reconciliation of net income (loss) and the assumed allocation of net income (loss) to the limited partners’ interest for purposes of computing net income (loss) per limited partner unit for the three months ended March 31, 2017 and 2016 (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2017

 

 

 

Three Months Ended March 31, 2016

 

 

 

 

 

  

Limited

  

General

  

 

 

 

 

 

 

 

  

Limited

  

General

  

 

 

 

 

 

 

 

 

Partner

 

Partner

 

 

 

 

 

 

 

 

 

Partner

 

Partner

 

 

 

 

Numerator:

 

Total

 

Interest

 

Interest

 

IDRs

 

 

 

Total

 

Interest

 

Interest

 

IDRs

 

Net income (loss) attributable to Global Partners LP

 

$

22,946

 

$

22,792

 

$

154

 

$

 —

 

 

 

$

(7,024)

 

$

(6,977)

 

$

(47)

 

$

 —

 

Declared distribution

 

$

15,829

 

$

15,723

 

$

106

 

$

 —

 

 

 

$

15,829

 

$

15,723

 

$

106

 

$

 —

 

Assumed allocation of undistributed net income (loss)

 

 

7,117

 

 

7,069

 

 

48

 

 

 —

 

 

 

 

(22,853)

 

 

(22,700)

 

 

(153)

 

 

 —

 

Assumed allocation of net income (loss)

 

$

22,946

 

$

22,792

 

$

154

 

$

 —

 

 

 

$

(7,024)

 

$

(6,977)

 

$

(47)

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

 

 

33,554

 

 

 

 

 

 

 

 

 

 

 

 

 

33,517

 

 

 

 

 

 

 

Dilutive effect of phantom units

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

 

 

33,610

 

 

 

 

 

 

 

 

 

 

 

 

 

33,517

 

 

 

 

 

 

 

Basic net income (loss) per limited partner unit

 

 

 

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.21)

 

 

 

 

 

 

 

Diluted net income (loss) per limited partner unit (1)

 

 

 

 

$

0.68

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.21)

 

 

 

 

 

 

 

 


(1)

Basic units were used to calculate diluted net loss per limited partner unit for the three months ended March 31, 2016, as using the effects of phantom units would have an anti-dilutive effect on net loss per limited partner unit.

 

The board of directors of the General Partner declared the following quarterly cash distribution:

 

 

 

 

 

 

 

 

 

 

    

Per Unit Cash

 

 

Distribution Declared for the

 

Cash Distribution Declaration Date

  

Distribution Declared

 

 

Quarterly Period Ended

 

April 28, 2017

 

$

0.4625

 

 

March 31, 2017

 

 

See Note 13, “Partners’ Equity and Cash Distributions” for further information.

 

Note 3.    Inventories

 

The Partnership hedges substantially all of its petroleum and ethanol inventory using a variety of instruments, primarily exchange-traded 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 fair value of these futures contracts, as well as the offsetting change in fair value on the hedged inventory, is recognized in earnings as an increase or decrease in cost of sales.  All hedged inventory designated in a fair value hedge relationship is valued using the lower of cost, as determined by specific identification, or net realizable value, as determined at the product level.  All petroleum and ethanol inventory not designated in a fair value hedging relationship is carried at the lower of historical cost, on a first-in, first-out basis, or net realizable value.

 

Convenience store inventory and Renewable Identification Numbers (“RINs”) inventory are carried at the lower of historical cost or net realizable value. 

11


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Inventories consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

    

2017

    

2016

 

Distillates: home heating oil, diesel and kerosene

 

$

157,037

 

$

180,272

 

Gasoline

 

 

70,093

 

 

101,368

 

Gasoline blendstocks

 

 

49,276

 

 

54,582

 

Crude oil

 

 

121,577

 

 

136,113

 

Residual oil

 

 

18,319

 

 

29,536

 

Propane and other

 

 

976

 

 

3,167

 

Renewable identification numbers (RINs)

 

 

640

 

 

631

 

Convenience store inventory

 

 

16,034

 

 

16,209

 

Total

 

$

433,952

 

$

521,878

 

 

In addition to its own inventory, the Partnership has exchange agreements for petroleum products and ethanol 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 $3.5 million and $4.0 million at March 31, 2017 and December 31, 2016, respectively.  Negative exchange balances are accounted for as accounts payable and amounted to $7.4 million and $13.4 million at March 31, 2017 and December 31, 2016, respectively.  Exchange transactions are valued using current carrying costs. 

 

Note 4.    Goodwill

 

The following table presents changes in goodwill, all of which has been allocated to the Gasoline Distribution and Station Operations (“GDSO”) segment (in thousands):

 

 

 

 

 

Balance at December 31, 2016

 

$

294,768

 

Disposals (1)

 

 

(1,995)

 

Balance at March 31, 2017

 

$

292,773

 


(1)

Disposals represent derecognition of goodwill associated with the sale and disposition of certain assets.  See Note 6.

 

 

Note 5.    Property and Equipment

 

Property and equipment consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31,

 

 

    

2017

    

2016

 

Buildings and improvements

 

$

994,236

 

$

984,373

 

Land

 

 

411,777

 

 

418,025

 

Fixtures and equipment

 

 

41,304

 

 

40,354

 

Idle plant assets

 

 

30,500

 

 

30,500

 

Construction in process

 

 

33,129

 

 

42,069

 

Capitalized internal use software

 

 

20,097

 

 

20,097

 

Total property and equipment

 

 

1,531,043

 

 

1,535,418

 

Less accumulated depreciation

 

 

456,578

 

 

435,519

 

Total

 

$

1,074,465

 

$

1,099,899

 

 

12


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Property and equipment includes assets held for sale of $11.9 million and $17.5 million at March 31, 2017 and December 31, 2016, respectively (see Note 5).  See Note 21 for assets held for sale recognized subsequent to March 31, 2017.

 

At March 31, 2017, the Partnership had a $61.5 million remaining net book value of long-lived assets at its West Coast facility, including $30.5 million related to the Partnership’s ethanol plant acquired in 2013.  In 2016, the Partnership shifted the facility from crude oil to ethanol transloading and began transloading ethanol.  The Partnership would need to take certain measures to prepare the facility for ethanol production in order to place the plant into service.  Therefore, the $30.5 million related to the ethanol plant was included in property and equipment and classified as idle plant assets at March 31, 2017 and December 31, 2016.

 

If the Partnership is unable to generate cash flows to support the recoverability of the plant and facility assets, this may become an indicator of potential impairment of the West Coast facility.  Associated with the fair value appraisals determined by third-party valuation specialists in support of the Partnership’s 2016 step two goodwill impairment test, the Partnership received an estimated fair value for the West Coast facility significantly in excess of the $61.5 million remaining net book value.  The estimated fair value obtained was based on market comparable transactions for sale of ethanol plant assets, both active and idle, at the time of sale.  While the fair value analysis was not prepared or obtained to support the recoverability of the West Coast facility or idle plant assets, the Partnership does not believe that changes in assumptions would impact the estimated fair value such that it might result in a fair value estimate of the West Coast facility that would be less than the $61.5 million net book value at March 31, 2017.  The Partnership will continue to monitor the market for ethanol, the continued business development of this facility for either ethanol or crude oil transloading, and the related impact this may have on the facility’s operating cash flows and whether this would constitute an impairment indicator.

 

Note 6.    Sales and Disposition of Assets

 

The following table provides the Partnership’s (gain) loss on sale and dispositions of assets for the three months ended March 31, 2017 and 2016 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

    

2017

    

2016

 

Sale of natural gas brokerage and electricity businesses

 

$

(14,172)

 

$