Attached files

file filename
EX-31.1 - EX-31.1 - GLOBAL PARTNERS LPglp-20180630ex311086e29.htm
EX-32.2 - EX-32.2 - GLOBAL PARTNERS LPglp-20180630ex322ef4b7f.htm
EX-32.1 - EX-32.1 - GLOBAL PARTNERS LPglp-20180630ex321cb0398.htm
EX-31.2 - EX-31.2 - GLOBAL PARTNERS LPglp-20180630ex312c2b933.htm

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 June 30, 2018

 

 

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 August 7, 2018.

 

 

 

 


 

TABLE OF CONTENTS

 

PART I.     FINANCIAL INFORMATION

 

 

 

 

 

Item 1.     Financial Statements (unaudited) 

 

3

 

 

 

Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017 

 

3

 

 

 

Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 

 

4

 

 

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017 

 

5

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017

 

6

 

 

 

Consolidated Statement of Partners’ Equity for the six months ended June 30, 2018 

 

7

 

 

 

Notes to Consolidated Financial Statements 

 

8

 

 

 

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

 

51

 

 

 

Item 3.     Quantitative and Qualitative Disclosures About Market Risk 

 

75

 

 

 

Item 4.     Controls and Procedures 

 

77

 

 

 

PART II.     OTHER INFORMATION 

 

78

 

 

 

Item 1.     Legal Proceedings 

 

78

 

 

 

Item 1A.   Risk Factors 

 

78

 

 

 

Item 6.     Exhibits 

 

78

 

 

 

SIGNATURES 

 

79

 

 

 

 

 

 

 

 


 

Item 1.Financial Statements

 

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

 

    

2018

    

2017

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,482

 

$

14,858

 

Accounts receivable, net

 

 

423,225

 

 

417,263

 

Accounts receivable—affiliates

 

 

4,057

 

 

3,773

 

Inventories

 

 

338,320

 

 

350,743

 

Brokerage margin deposits

 

 

6,871

 

 

9,681

 

Derivative assets

 

 

12,805

 

 

3,840

 

Prepaid expenses and other current assets

 

 

85,117

 

 

77,977

 

Total current assets

 

 

877,877

 

 

878,135

 

Property and equipment, net

 

 

1,005,929

 

 

1,036,667

 

Intangible assets, net

 

 

51,459

 

 

56,545

 

Goodwill

 

 

310,855

 

 

312,401

 

Other assets

 

 

32,837

 

 

36,421

 

Total assets

 

$

2,278,957

 

$

2,320,169

 

Liabilities and partners’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

256,768

 

$

313,412

 

Working capital revolving credit facility—current portion

 

 

198,000

 

 

126,700

 

Environmental liabilities—current portion

 

 

5,004

 

 

5,009

 

Trustee taxes payable

 

 

43,699

 

 

110,321

 

Accrued expenses and other current liabilities

 

 

89,789

 

 

99,507

 

Derivative liabilities

 

 

14,764

 

 

13,708

 

Total current liabilities

 

 

608,024

 

 

668,657

 

Working capital revolving credit facility—less current portion

 

 

100,000

 

 

100,000

 

Revolving credit facility

 

 

185,000

 

 

196,000

 

Senior notes

 

 

663,116

 

 

661,774

 

Environmental liabilities—less current portion

 

 

50,333

 

 

52,968

 

Financing obligations

 

 

150,223

 

 

150,334

 

Deferred tax liabilities

 

 

38,607

 

 

40,105

 

Other long-term liabilities

 

 

53,672

 

 

56,013

 

Total liabilities

 

 

1,848,975

 

 

1,925,851

 

Partners’ equity

 

 

 

 

 

 

 

Global Partners LP equity:

 

 

 

 

 

 

 

Common unitholders 33,995,563 units issued and 33,652,198 outstanding at June 30, 2018 and 33,995,563 units issued and 33,645,092 outstanding at December 31, 2017)

 

 

435,322

 

 

399,399

 

General partner interest (0.67% interest with 230,303 equivalent units outstanding at June 30, 2018 and December 31, 2017)

 

 

(2,684)

 

 

(2,978)

 

Accumulated other comprehensive loss

 

 

(5,263)

 

 

(5,468)

 

Total Global Partners LP equity

 

 

427,375

 

 

390,953

 

Noncontrolling interest

 

 

2,607

 

 

3,365

 

Total partners’ equity

 

 

429,982

 

 

394,318

 

Total liabilities and partners’ equity

 

$

2,278,957

 

$

2,320,169

 

 

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

    

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

    

2018

      

2017

    

2018

   

2017

 

Sales

 

$

3,126,575

 

$

2,089,530

 

$

5,929,466

 

$

4,360,314

 

Cost of sales

 

 

2,977,314

 

 

1,954,168

 

 

5,635,875

 

 

4,084,925

 

Gross profit

 

 

149,261

 

 

135,362

 

 

293,591

 

 

275,389

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

 

39,954

 

 

34,679

 

 

79,320

 

 

71,466

 

Operating expenses

 

 

76,218

 

 

71,169

 

 

150,267

 

 

138,382

 

Gain on trustee taxes

 

 

 —

 

 

 —

 

 

(52,627)

 

 

 —

 

Amortization expense

 

 

2,437

 

 

2,260

 

 

4,905

 

 

4,521

 

Net loss (gain) on sale and disposition of assets

 

 

3,033

 

 

2,381

 

 

4,900

 

 

(9,481)

 

Total costs and operating expenses

 

 

121,642

 

 

110,489

 

 

186,765

 

 

204,888

 

Operating income

 

 

27,619

 

 

24,873

 

 

106,826

 

 

70,501

 

Interest expense

 

 

(21,613)

 

 

(21,923)

 

 

(43,058)

 

 

(45,210)

 

Income before income tax benefit (expense)

 

 

6,006

 

 

2,950

 

 

63,768

 

 

25,291

 

Income tax benefit (expense)

 

 

16

 

 

(959)

 

 

929

 

 

(795)

 

Net income

 

 

6,022

 

 

1,991

 

 

64,697

 

 

24,496

 

Net loss attributable to noncontrolling interest

 

 

391

 

 

383

 

 

758

 

 

824

 

Net income attributable to Global Partners LP

 

 

6,413

 

 

2,374

 

 

65,455

 

 

25,320

 

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

 

 

110

 

 

16

 

 

506

 

 

170

 

Limited partners’ interest in net income

 

$

6,303

 

$

2,358

 

$

64,949

 

$

25,150

 

Basic net income per limited partner unit

 

$

0.19

 

$

0.07

 

$

1.93

 

$

0.75

 

Diluted net income  per limited partner unit

 

$

0.19

 

$

0.07

 

$

1.92

 

$

0.75

 

Basic weighted average limited partner units outstanding

 

 

33,652

 

 

33,554

 

 

33,652

 

 

33,554

 

Diluted weighted average limited partner units outstanding

 

 

33,863

 

 

33,652

 

 

33,831

 

 

33,619

 

 

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

4


 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2018

    

2017

    

2018

 

2017

 

Net income

 

$

6,022

 

$

1,991

 

$

64,697

 

$

24,496

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of cash flow hedges

 

 

14

 

 

199

 

 

223

 

 

597

 

Change in pension liability

 

 

333

 

 

250

 

 

(18)

 

 

569

 

Total other comprehensive income

 

 

347

 

 

449

 

 

205

 

 

1,166

 

Comprehensive income

 

 

6,369

 

 

2,440

 

 

64,902

 

 

25,662

 

Comprehensive loss attributable to noncontrolling interest

 

 

391

 

 

383

 

 

758

 

 

824

 

Comprehensive income attributable to Global Partners LP

 

$

6,760

 

$

2,823

 

$

65,660

 

$

26,486

 

 

 

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

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

    

2018

    

2017

    

Cash flows from operating activities

 

 

 

 

 

 

 

Net income

 

$

64,697

 

$

24,496

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

51,824

 

 

52,913

 

Amortization of deferred financing fees

 

 

2,686

 

 

2,955

 

Amortization of leasehold interests

 

 

181

 

 

528

 

Amortization of senior notes discount

 

 

744

 

 

716

 

Bad debt expense

 

 

450

 

 

855

 

Unit-based compensation expense

 

 

2,285

 

 

625

 

Write-off of financing fees

 

 

 —

 

 

573

 

Gain on trustee taxes

 

 

(52,627)

 

 

 —

 

Net loss (gain) on sale and disposition of assets

 

 

4,900

 

 

(9,481)

 

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

 

 

 

 

 

 

 

Accounts receivable

 

 

(6,412)

 

 

159,599

 

Accounts receivable-affiliate

 

 

(284)

 

 

(703)

 

Inventories

 

 

12,007

 

 

150,762

 

Broker margin deposits

 

 

2,810

 

 

18,240

 

Prepaid expenses, all other current assets and other assets

 

 

(5,610)

 

 

(37,861)

 

Accounts payable

 

 

(56,644)

 

 

(124,527)

 

Trustee taxes payable

 

 

(13,995)

 

 

1,164

 

Change in derivatives

 

 

(7,909)

 

 

(9,540)

 

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

 

 

(15,329)

 

 

(21,387)

 

Net cash (used in) provided by operating activities

 

 

(16,226)

 

 

209,927

 

Cash flows from investing activities

 

 

 

 

 

 

 

Capital expenditures

 

 

(27,168)

 

 

(19,308)

 

Proceeds from sale of property and equipment

 

 

7,241

 

 

28,238

 

Net cash (used in) provided by investing activities

 

 

(19,927)

 

 

8,930

 

Cash flows from financing activities

 

 

 

 

 

 

 

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

 

 

71,300

 

 

(175,500)

 

Net payments on revolving credit facility

 

 

(11,000)

 

 

(16,000)

 

Noncontrolling interest capital contribution

 

 

 —

 

 

279

 

Distribution to noncontrolling interest

 

 

 —

 

 

(465)

 

Distributions to partners

 

 

(31,523)

 

 

(31,277)

 

Net cash provided by (used in) financing activities

 

 

28,777

 

 

(222,963)

 

Cash and cash equivalents

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

 

(7,376)

 

 

(4,106)

 

Cash and cash equivalents at beginning of period

 

 

14,858

 

 

10,028

 

Cash and cash equivalents at end of period

 

$

7,482

 

$

5,922

 

Supplemental information

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

31,837

 

$

22,612

 

 

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, 2017

 

$

399,399

 

$

(2,978)

 

$

(5,468)

 

$

3,365

 

$

394,318

 

Net income (loss)

 

 

64,949

 

 

506

 

 

 —

 

 

(758)

 

 

64,697

 

Distributions to partners

 

 

(31,446)

 

 

(212)

 

 

 —

 

 

 —

 

 

(31,658)

 

Unit-based compensation

 

 

2,285

 

 

 —

 

 

 —

 

 

 —

 

 

2,285

 

Other comprehensive income

 

 

 —

 

 

 —

 

 

205

 

 

 —

 

 

205

 

Dividends on repurchased units

 

 

135

 

 

 —

 

 

 —

 

 

 —

 

 

135

 

Balance at June 30, 2018

 

$

435,322

 

$

(2,684)

 

$

(5,263)

 

$

2,607

 

$

429,982

 

 

 

 

 

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 June 30, 2018, the Partnership had a portfolio of 1,445 owned, leased and/or supplied gasoline stations, including 256 directly operated convenience stores, in the Northeast, Maryland and Virginia.  The Partnership also receives revenue from convenience store sales, rental income and sundries.  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 June 30, 2018, affiliates of the General Partner, including its directors and executive officers and their affiliates, owned 7,377,738 common units, representing a 21.7% limited partner interest.

 

Basis of Presentation

 

The accompanying consolidated financial statements as of June 30, 2018 and December 31, 2017 and for the three and six months ended June 30, 2018 and 2017 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, 2017 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, except as described below for trustee taxes and in Note 2 herein for the adoption of Accounting Standard Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” including modifications to that standard thereafter, and now codified as Accounting Standards Codification 606 (“ASC 606”) which the Partnership adopted on January 1, 2018 (see Note 22, New Accounting Standards—“Accounting Standards or Updates Recently Adopted” for additional information).

 

8


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2018.  The consolidated balance sheet at December 31, 2017 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, 2017.

 

Trustee Taxes

 

The Partnership collects trustee taxes, which consist of various pass through taxes collected on behalf of taxing authorities, and remits such taxes directly to those taxing authorities.  Examples of trustee taxes include, among other things, motor fuel excise tax and sales and use tax.  As such, it is the Partnership’s policy to exclude trustee taxes from revenues and cost of sales and account for them as current liabilities.

 

Volumetric Ethanol Excise Tax Credit—In the first quarter of 2018, the Partnership recognized a one-time income item of approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit, which tax credit program expired in 2011.  Based upon the significant passage of time from that 2011 expiration date, including underlying statutes of limitation, as of January 31, 2018 the Partnership determined that the liability was no longer required.  The liability had historically been included in trustee taxes in the accompanying consolidated balance sheets.  The recognition of this one-time income item, which is included in gain on trustee taxes in the accompanying consolidated statements of operations for the six months ended June 30, 2018, did not impact cash flows from operations for the six months ended June 30, 2018 and will not impact cash flows from operations for the year ending December 31, 2018.

 

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

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

    

2018

    

2017

    

2018

 

2017

 

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

 

78

%  

67

%  

71

%  

62

%  

Crude oil sales and crude oil logistics revenue

 

 1

%  

 7

%  

 1

%  

 6

%  

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

 

18

%  

22

%  

25

%  

28

%  

Convenience store sales, rental income and sundries

 

 3

%  

 4

%  

 3

%  

 4

%  

Total

 

100

%  

100

%  

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

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

    

2018

    

2017

    

2018

 

2017

 

Wholesale segment

 

23

%  

20

%

26

%  

26

%  

Gasoline Distribution and Station Operations segment

 

74

%  

77

%

71

%  

71

%  

Commercial segment

 

 3

%  

 3

%

 3

%  

 3

%  

Total

 

100

%  

100

%

100

%  

100

%  

 

See Note 16, “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 and six months ended June 30, 2018 and 2017.

.

Note 2.    Adoption of ASC 606, Revenue from Contract Customers

 

On January 1, 2018, the Partnership adopted ASC 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.  Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts are not adjusted and continue to be reported in accordance with the Partnership’s historic accounting under ASC 605, “Revenue Recognition,” (“ASC 605”).  See below for the Partnership’s updated revenue recognition policy and the required disclosures under ASC 606.

 

Update to Revenue Recognition Policy

 

The Partnership’s sales relate primarily to the sale of refined petroleum products, renewable fuels, crude oil and propane and are recognized along with the related receivable upon delivery, net of applicable provisions for discounts and allowances.  The Partnership may also provide for shipping costs at the time of sale, which are included in cost of sales.

 

Contracts with customers typically contain pricing provisions that are tied to a market index, with certain adjustments based on quality and freight due to location differences and prevailing supply and demand conditions, among other factors.  As a result, the price of the products fluctuates to remain competitive with other available product supplies.  The revenue associated with such arrangements is recognized upon delivery.

 

10


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In addition, the Partnership generates revenue from its logistics activities when it stores, transloads and ships products owned by others.  Revenue from logistics services is recognized as services are provided.

 

The Partnership has certain logistics agreements that require counterparties to throughput a minimum volume over an agreed-upon period.  These agreements may include make-up rights if the minimum volume is not met.  The Partnership recognizes revenue associated with make-up rights at the earlier of when the make-up volume is shipped, the make-up right expires or when it is determined that the likelihood that the shipper will utilize the make-up right is remote.

 

The Partnership also recognizes convenience store sales of gasoline, grocery and other merchandise and commissions on lottery at the time of the sale to the customer.  Gasoline station rental income is recognized on a straight-line basis over the term of the lease.

 

Product revenue is not recognized on exchange agreements, which are entered into primarily to acquire various refined petroleum products, renewable fuels and crude oil of a desired quality or to reduce transportation costs by taking delivery of products closer to the Partnership’s end markets.  The Partnership recognizes net exchange differentials due from exchange partners in sales upon delivery of product to an exchange partner.  The Partnership recognizes net exchange differentials due to exchange partners in cost of sales upon receipt of product from an exchange partner.

 

The amounts recorded for bad debts are generally based upon a specific analysis of aged accounts while also factoring in any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular customers.  Bad debt provisions are included in selling, general and administrative expenses.

 

Required Disclosures Under ASC 606

 

Disaggregation of Revenue

 

The following table provides the disaggregation of revenue from contracts with customers and other sales by segment for the periods presented (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

Revenue from contracts with customers:

 

Wholesale

 

GDSO

 

Commercial

 

Total

 

Refined petroleum products, renewable fuels, crude oil and propane

 

$

293,100

 

$

1,086,078

 

$

192,046

 

$

1,571,224

 

Station operations

 

 

 —

 

 

82,802

 

 

 —

 

 

82,802

 

Total revenue from contracts with customers

 

 

293,100

 

 

1,168,880

 

 

192,046

 

 

1,654,026

 

Other sales:

 

 

 

 

 

 

 

 

 

Revenue originating as physical forward contracts and exchanges

 

 

1,324,362

 

 

 —

 

 

129,616

 

 

1,453,978

 

Revenue from leases

 

 

1,004

 

 

17,567

 

 

 —

 

 

18,571

 

Total other sales

 

 

1,325,366

 

 

17,567

 

 

129,616

 

 

1,472,549

 

Total sales

 

$

1,618,466

 

$

1,186,447

 

$

321,662

 

$

3,126,575

 

 

11


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

Revenue from contracts with customers:

 

Wholesale

 

GDSO

 

Commercial

 

Total

 

Refined petroleum products, renewable fuels, crude oil and propane

 

$

760,110

 

$

1,978,377

 

$

362,220

 

$

3,100,707

 

Station operations

 

 

 —

 

 

153,007

 

 

 —

 

 

153,007

 

Total revenue from contracts with customers

 

 

760,110

 

 

2,131,384

 

 

362,220

 

 

3,253,714

 

Other sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue originating as physical forward contracts and exchanges

 

 

2,410,679

 

 

 —

 

 

228,597

 

 

2,639,276

 

Revenue from leases

 

 

1,509

 

 

34,967

 

 

 —

 

 

36,476

 

Total other sales

 

 

2,412,188

 

 

34,967

 

 

228,597

 

 

2,675,752

 

Total sales

 

$

3,172,298

 

$

2,166,351

 

$

590,817

 

$

5,929,466

 

 

Nature of Goods and Services

 

Revenue from Contracts with Customers (ASC 606):

 

·

Refined petroleum products, renewable fuels, crude oil and propane sales—Under the Partnership’s Wholesale, Gasoline Distribution and Station Operations (“GDSO”) and Commercial segments, revenue is recognized at the point control that the product is transferred to the customer and collectability is reasonably assured. 

 

·

Station operations—Revenue from convenience store sales of grocery and other merchandise and sundries (such as car wash sales, lottery and ATM commissions) is recognized at the time of the sale to the customer.

 

Other Revenue:

 

·

Revenue Originating as Physical Forward Contracts and Exchanges—The Partnership’s commodity contracts and other derivative activity include:  (i) exchange-traded derivative contracts that are hedges against inventory and either do not qualify for hedge accounting or are not designated in a hedge accounting relationship, (ii) exchange-traded derivative contracts used to economically hedge physical forward contracts, (iii) financial forward and over-the-counter swap agreements used to economically hedge physical forward contracts and (iv) the derivative instruments under the Partnership’s controlled trading program.  The Partnership does not take the normal purchase and sale exemption available under ASC 815, “Derivatives and Hedging,” for its physical forward contracts.  This income is recognized under ASC 815 and ASC 845, “Nonmonetary Transactions.”

 

·

Revenue from Leases—The Partnership has rental income from gasoline stations and cobranding arrangements and lease income from space leased to several unrelated third parties at several of the Partnership’s terminals.  This income is recognized under ASC 840, “Leases.”

 

Transaction Price Allocated to Remaining Performance Obligations

 

The Partnership has elected certain of the optional exemptions from the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue.  Accordingly, the Partnership applies the practical expedient in paragraph ASC 606-10-50-14 to its contracts with customers where revenue is tied to a market-index and does not disclose information about variable consideration from remaining performance obligations for which the Partnership recognizes revenue.

 

12


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The fixed component of estimated revenues expected to be recognized in the future related to performance obligations tied to a market index that are unsatisfied (or partially unsatisfied) at the end of the reporting period are not significant.

 

Contract Balances

 

A receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets, is recognized in the period the Partnership provides services when its right to consideration is unconditional.  In contrast, a contract asset will be recognized when the Partnership has fulfilled a contract obligation, but must perform other obligations before being entitled to payment. 

 

The nature of the receivables related to revenue from contracts with customers and other revenue, as well as contract assets, are the same, given they are related to the same customers and have the same risk profile and securitization, and the Partnership believes the disaggregation of them would not be meaningful.

 

A contract liability is recognized when the Partnership has an obligation to transfer goods or services to a customer for which the Partnership has received consideration (or the amount is due) from the customer.  The Partnership had no contract liabilities at June 30, 2018 and December 31, 2017.  Payment terms on invoiced amounts are typically 2 to 30 days.

 

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 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 June 30, 2018 and December 31, 2017 excludes 343,365 and 350,471 common units, respectively, held on behalf of the Partnership pursuant to its repurchase program (see Note 13).  These units are not deemed outstanding for purposes of calculating net income per limited partner unit (basic and diluted).

 

13


 

Table of Contents 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 periods presented (in thousands, except per unit data):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

Three Months Ended June 30, 2017

 

 

 

 

 

  

Limited

  

General

  

 

 

 

 

 

 

  

Limited

  

General

  

 

 

 

 

 

 

 

 

Partner

 

Partner

 

 

 

 

 

 

 

 

Partner

 

Partner

 

 

 

 

Numerator:

 

Total

 

Interest

 

Interest

 

IDRs

 

 

Total

 

Interest

 

Interest

 

IDRs

 

Net income attributable to Global Partners LP

 

$

6,413

 

$

6,303

 

$

110

 

$

 —

 

 

$

2,374

 

$

2,358

 

$

16

 

$

 —

 

Declared distribution

 

$

16,325

 

$

16,149

 

$

109

 

$

67

 

 

$

15,829

 

$

15,723

 

$

106

 

$

 —

 

Assumed allocation of undistributed net loss

 

 

(9,912)

 

 

(9,846)

 

 

(66)

 

 

 —

 

 

 

(13,455)

 

 

(13,365)

 

 

(90)

 

 

 —

 

Assumed allocation of net income

 

$

6,413

 

$

6,303

 

$

43

 

$

67

 

 

$

2,374

 

$

2,358

 

$

16

 

$

 —

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

 

 

33,652

 

 

 

 

 

 

 

 

 

 

 

 

33,554

 

 

 

 

 

 

 

Dilutive effect of phantom units

 

 

 

 

 

211

 

 

 

 

 

 

 

 

 

 

 

 

98

 

 

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

 

 

33,863

 

 

 

 

 

 

 

 

 

 

 

 

33,652

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

$

0.07

 

 

 

 

 

 

 

Diluted net income per limited partner unit

 

 

 

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

 

Six Months Ended June 30, 2017