Business Context and Reporting Period
Company: Global Partners LP
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2010
Business Overview: Global Partners LP is a master limited partnership engaged in the wholesale and commercial distribution of refined petroleum products (gasoline, distillates, residual oil) and natural gas in the Northeastern United States. The company operates through two segments: Wholesale and Commercial.
Key Financial Metrics
| Metric (in thousands, except per unit) | Q1 2010 | Q1 2009 |
|---|---|---|
| Sales | $1,962,384 | $1,632,955 |
| Gross Profit | $45,407 | $50,714 |
| Operating Income | $19,479 | $23,364 |
| Net Income | $15,028 | $18,863 |
| Net Income per Diluted Unit | $1.06 | $1.40 |
| EBITDA (Non-GAAP) | $23,528 | $27,366 |
| Distributable Cash Flow (Non-GAAP) | $18,593 | $21,996 |
| Cash from Operating Activities | $45,494 | $111,230 |
| Total Debt Outstanding | $412,400 | $462,600 (Dec 31, 2009) |
| Working Capital | $380,760 | $295,223 (Dec 31, 2009) |
Material Changes vs. Prior Period
- Revenue Increase: Sales increased 20% to $1.96 billion, driven primarily by a 61% increase in heating oil prices and a 65% increase in gasoline prices compared to Q1 2009.
- Volume Decline: Despite higher prices, aggregate product volume sold decreased by 14% (approx. 155 million gallons). Distillate volume dropped 17% and residual oil volume dropped 19%, attributed to warmer-than-normal temperatures (9% warmer than normal) and conservation efforts.
- Margin Pressure: Gross profit decreased 10% to $45.4 million. Net product margin in the gasoline segment fell significantly ($5.4 million decrease) due to market pressure, offsetting gains in distillate margins.
- Cash Flow Volatility: Net cash provided by operating activities decreased $65.7 million to $45.5 million. This was largely due to a $120.1 million swing in the fair value of forward fixed price contracts (requiring margin payments in 2010 vs. receiving funds in 2009).
- Capital Structure: The company completed a public offering of 3.91 million common units on March 19, 2010, raising net proceeds of approximately $84.8 million, which were used to reduce indebtedness.
Guidance, Outlook, and Risks
- Seasonality: Management notes that results are typically stronger in Q1 and Q4 due to heating demand. Warmer weather in Q1 2010 negatively impacted sales volumes.
- Distributions: A quarterly cash distribution of $0.4875 per unit was declared for Q1 2010, payable May 14, 2010. This reaches the second target distribution level, triggering incentive distributions to the General Partner.
- Acquisitions: The FTC closed its regulatory review of the planned acquisition of three terminals in Newburgh, NY, in April 2010. Closing is expected in Q3 2010.
- Liquidity: Total remaining availability under the credit agreement was $404.8 million as of March 31, 2010. The company remains compliant with all financial covenants.
- Risks: Key risks include exposure to commodity price volatility, weather conditions affecting heating demand, potential conversion of customers to natural gas, and credit market conditions affecting borrowing capacity.
Investor Verification Checklist
- Public Offering Impact: Verify the dilution effect of the 3.91 million new units issued in March 2010 on future per-unit distributions.
- Weather Sensitivity: Monitor heating degree days for the remainder of the year, as warmer temperatures directly reduce distillate and residual oil volumes.
- Gasoline Margins: Assess the sustainability of gasoline margins given the reported market pressure and significant decline in net product margin for this segment.
- Derivative Exposure: Review the fair value of forward fixed price contracts and margin requirements, as fluctuations here caused significant volatility in operating cash flow.
- Acquisition Closing: Confirm the closing timeline and integration costs for the Warex Terminals acquisition in Newburgh, NY.