Q3 2020 Global Partners LP Earnings Call

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Good day, everyone and welcome to the global Partners' third quarter 2020 financial results Conference call.

Today's call is being recorded there will be an opportunity for questions at the end of the call. At this time all participants are in a listen only mode.

No one should require operator assistance during the conference. Please press star zero on your telephone keypad.

With us from global partners are President and Chief Executive Officer, Mr., Eric Slifka.

Chief Financial Officer, Ms., Daphne Foster Chief operating Officer, Mr., Mark Romaine Executive Vice President and General Counsel Mr. Edward Fred what.

This time I'd like to turn the call over to Mr., Ken well for opening remarks. Please go ahead Sir.

Good morning, everyone. Thank you for joining us today before we begin let me remind everyone that this morning, we will be making forward looking statements within the meaning of federal securities laws.

These statements may include but are not limited to projections beliefs goals estimates concerning the future infinite financial and operational performance of global partners.

Forward looking statements are based on assumptions regarding market conditions, such as the crude oil market business cycles demand for petroleum products, including gasoline and gasoline blend stocks and renewable fuels utilization of assets and facilities weather credit markets demand for C store offerings the regulatory.

Orient permitting environment, and the forward product pricing curve, which could influence quarterly financial results.

These statements involve significant risks and uncertainties some of which are beyond the partnership's control, including without limitation.

The impact and duration of the COVID-19 pandemic uncertainty around the timing of an economic recovery in the United States, which will impact the demand for the products, we sell and the services we provide.

Uncertainty around the impact of COVID-19 to our counterparties and our customers and their corresponding ability to perform their obligations and to utilize the products, we sell and or services we provide.

Uncertainty around the impact in duration of federal state and municipal regulations and directors related to cope in 19 and assumptions that could cause actual results to differ materially from the partnerships historical experience and present expectations or projections.

We believe these assumptions are reasonable given currently available information and our assessment of historical trends.

Including federal state and local fleets utilities first responders and others, whose vehicles are on the road every day.

In addition, our network of convenience stores has become critical markets for those wishing to stay close to home and secure their basic goods and a smaller setting.

We have adapted to ensure we have the products to meet these customers needs.

Are strong network and adaptability enable us to take advantage of opportunities in the market to grow our business organically and through acquisitions.

To that point the M&A pipeline is very active and we continue to evaluate opportunities with the potential to expand our geographic footprint complement our service offerings and drive profitability and growth.

We continue to prioritize the safety of our employees guests customers and suppliers.

Our office space employees successfully transitioned to a remote work environment with no disruption to our business all of our gas station C stores and fueled terminals are open and fully operational.

Turning to recent highlights last week the board of directors of our general partner increase a quarterly Castro distribution on our common units to 50 per unit or $2 on an annualized basis.

The distribution will be paid November 13th to unit holders of record as of the close of business on November 9th.

On our queue to call, we discuss the signing of a long term contract with a leading downstream energy company to throughput renewable diesel at our rail and waterborne terminal on the West coast.

I'm pleased to announce that that the first shipments of renewable diesel are expected to come through the terminal this quarter.

This business is a natural extension of our years of expertise and through putting sourcing and distributing renewable fuels and our commitment to providing it bridge to low carbon fuels, we continue to increase our flexibility to move renewable fuels to serve growing demand and doing so at scale.

For example, we continue to introduce modifications to our terminal infrastructure to increase the ability to supply renewables.

Before turning it over to Daphne I want to note the appointment of Robert Owens as the newest member of our board.

Bob was elected in October served as President and Chief Executive Officer of Sunoco LLP from 2012.

Till his retirement in 2017.

He brings to the board more than 40 years of entrepreneurial ism innovation and success and leading and growing energy sector businesses, and we look forward to benefit benefiting from his perspective.

With that now let me turn the call over to Daphne for her financial review Daphne.

Thank you Eric.

And good morning, everyone.

Echoing Eric's comments, we've performed well both financially and operationally while navigating in this unique environment, we continue to manage costs and to leverage the efficiencies are vertically integrated terminal distribution supply and retail network to generate strong performance.

As we go through the numbers for Q3 keep in mind that net income EBITDA and distributable cash flow and last year's third quarter included a 13.1 million dollar loss on the early extinguishment of debt related to the repurchase in July 2019 of our 6.25% senior.

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Looking at our results net income for the third quarter of 2020 was 18.2 million compared with $15 1 million in the same period of 2019.

Adjusted EBITDA was $65.9 million in the third quarter of 2020.

Versus 66.1 million in the year earlier period.

D. C. F was 31.3 million in the third quarter of 2020, compared with 30.4 million in the same period of 2019.

Trailing 12 month distribution coverage at the end of the third quarter was 2.4 times after factoring in distributions to the preferred unitholders that coverage was 2.3 times.

Volume in the quarter declined 236 million gallons to 1.4 billion gallons from 1.6 billion in the same period of 2019 with decreases across all segments.

The less traffic at our C stores.

At the end of the quarter R. G. D. S. O portfolio consisted of 1500 and 42 sites.

Comprised of 278 company operated stores 272 commissioned agents two O nine lessee dealers and seven eighty-three contract dealers.

Looking at the wholesale segment third quarter Twenty-twenty product margin decreased 6.6 million to 27.6 million, primarily reflecting less favorable market conditions than in Q3 2019.

Gasoline gasoline blendstock product margin decreased 3.9 million to 16.3 million.

Who'd all product margin increased 290000 product margin from other oils and related products was down 3 million to 14 million primarily in residual fuels.

Commercial segment product margin declined 4.4 million to 2.8 million, primarily due to a decrease in bunkering activity.

Turning to expenses operating expenses were down 5.6 million to 82.2 million in the third quarter of 2020 due to lower expenses at our G. D. S O sites.

This decrease reflected in part lower credit card fees due to the reduction in volume and price.

Lower salary expense due primarily to reduced store hours.

And lower maintenance and repair expenses.

SG&A expenses were down 2.1 million to 43.2 million in the third quarter, primarily due to a decrease in a crude incentive comp.

Interest expense of 19.9 million in the quarter was down 2.2 million year over year due to lower average balances on a credit facilities and lower interest rates.

Capex in the third quarter was approximately 17.9 million consisting of 12 million of maintenance Capex and 5.9 million of expansion Capex, primarily related to a gas station business.

Through the first nine months of 2020, we have invested 24.8 million and maintenance Capex and 14.8 million an expansion capex.

For full year 2020, as we work to catch up for the pause we imposed on discretionary expenditures earlier in the year. We continue to project maintenance Capex of approximately 45 to 55 million an expansion capex, excluding acquisitions of approximately 30 to 40 million.

The majority of these investments will late primarily tore a gasoline station and convenience store business.

Turning to the balance sheet leverage which is defined in a credit agreement is funded debt to EBITDA was approximately 3.2 times at the end of the third quarter.

We continue to have ample excess capacity under a credit facility.

As of September 32020, total borrowings outstanding under the credit agreement, where 348.1 million, including 160.1 million under our 770 million dollar working capital revolving credit facility and 188 million outstanding on our $400 million revolving credit facility.

In October we completed the sale of our previously announced private offering of 350 million an aggregate principal amount of 6.875% senior unsecured notes do 2029.

The net proceeds from the offering we're used to fund the redemption of the 300 million, 7% senior notes do 2000, twenty-three and to repay a portion of borrowings outstanding under a credit agreement.

In the fourth quarter of 2020, we expect this redemption will result in a loss of approximately 7.2 million from the early extinguishment of debt associated with the call premium as well as the right off of remaining unamortized deferred financing fees.

Before I turn the call back to Eric I Wanna, Let you know that in the coming weeks, we will be meeting with investors at the RBC midstream and the energy infrastructure conference. The Wells Fargo virtual midstream and utilities symposium and there'd be a very securities leveraged Finance conference if you're participating we look forward to the opportunity to meet with.

You then Eric.

Thanks, Thanks, Daphne in summary, or 2020 performance remains largely dependent on the extent and duration of COVID-19, while we continue to see our integrated business model and diversified product portfolio as long term strategic assets for the partnership ongoing uncertainty about the economic effects of Covid.

19 continue to limit our near term visibility with that now delfino I'd be happy to take your questions operator.

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Thank you. Our first question comes from Solon <unk>, Let's Sniffle. Please proceed with your question.

Hey, Good morning. This is 10 on for salmon.

I know you guys kind of mentioned the M&A market was.

Starting to be a little active just wondering if you could talk broadly about any opportunities you're currently saying.

Yeah, I mean, I I you know <unk>. This is Eric Ah you know what I would say is you know obviously.

I can't get into anything specific but I would say very broadly you know what we like about the <unk> will talk specifically about the retail business is it's very broadly owned there's a lot of smaller operators that are out there family run business.

This is you know generational in some form and there seems to just be a lot of activity in terms of people considering you know either selling their businesses changing their operations doing things differently than they have.

Have in the past and so when we say you know active that's really how we describe it you know I would also say there continues to sort of be.

I'd say a lot of activity not just around emanate, but also around the ideas and concepts of renewables and I'm not exactly sure where that ultimately takes the company, but I do believe it's an opportunity because it's new it's different and there's a.

A lot of interest and activity around moving producing and delivering those kinds of barrel. So you'll ultimately you know I'm not sure of the exact role that will play there, but I can tell you. We are trying to to make sure that we're involved in opportunities that would fit the company.

Got it that was that was very helpful. And then just one last one for me. So just wondering how gasoline sales at your retail sides have trended kind of for the month of October just wondering if you're saying you know a little increase over three you or or it's kind of.

If it's been just pulling up just curious on your thoughts there.

Dark death did you guys Wanna, one handle that sure I'm happy to I I think you know for the third quarter and I think into the fourth quarter meeting October it's really been sort of hanging at you know mid double digit percentages down you know year over year, you know haven't seen much chain.

To date and you know certainly what we saw in the third quarter and have continued to see although no you in the future is that margins continued to be helpful to offset some of that shortfall in volume.

You know I, Tim It's Eric I can say you know the market feels a little soft.

Right.

So and if you went you sort of look month to month, there were times, where you had you know sort of month to month. These increases in in demand right and it feels like it's sort of just soft and heading a little bit in the other direction right.

Got it that that's super helpful that'll be it for me you guys. Thanks for the time.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

There are no further questions at this time I would like to turn the call back to Earth Pliska for any closing comment.

Thank you for joining us this morning, with Thanksgiving fast approaching and the social limitations of COVID-19, still very much with us this will undoubtedly be unique holiday season.

On behalf every one of global we hope that you'll stay safe healthy and Bridget physical distance with family and friends by keeping in touch as much as possible. We look forward to keeping you updated on our progress. Thank you.

That concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a great day.

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