Business Context and Reporting Period
Company: Global Partners LP
Filing Type: Form 8-K (Current Report)
Date: February 2, 2011
Subject: Preliminary estimates of financial results for the fourth quarter and full year ended December 31, 2010. The Partnership operates in the wholesale, marketing, and distribution of refined petroleum products.
Key Financial Metrics (Preliminary Estimates)
| Metric | Q4 2010 | Q4 2009 | Full Year 2010 | Full Year 2009 |
|---|---|---|---|---|
| Net Income | $5.8 million | $12.2 million | $26.9 million | $34.1 million |
| EBITDA | $21.8 million | $20.7 million | $72.3 million | $66.7 million |
| Distributable Cash Flow (DCF) | $12.4 million | $15.2 million | $45.9 million | $45.5 million |
| Net Cash Used in Operating Activities | ($54.2) million | ($86.9) million | ($87.2) million | ($61.1) million |
| Depreciation & Amortization | $8.4 million | $3.9 million | $23.1 million | $16.0 million |
| Interest Expense | $8.0 million | $4.2 million | $22.3 million | $15.2 million |
Note: Revenue figures are not explicitly stated in the filing text; only Net Income, EBITDA, and Cash Flow metrics are provided.
Material Changes vs. Prior Period
- Net Income Decline: Q4 2010 net income decreased by $6.4 million compared to Q4 2009. Full-year 2010 net income was $7.2 million lower than 2009.
- EBITDA Growth: Despite lower net income, EBITDA increased by $1.1 million in Q4 and $5.6 million for the full year compared to 2009.
- Operating Cash Flow Improvement: Net cash used in operating activities decreased significantly in Q4 2010 ($54.2 million) compared to Q4 2009 ($86.9 million), indicating improved working capital management or inventory timing.
- Expense Increases: Depreciation and amortization nearly doubled in Q4 due to recent acquisitions. Interest expense also increased due to acquisitions and higher commodity prices.
Outlook, Risks, and Management Commentary
Management Commentary
- Market Conditions: Q4 2010 results were negatively impacted by adverse market conditions and fewer advantageous purchasing opportunities, primarily in the distillates business. Management does not believe these are long-term issues.
- Gasoline Business: The gasoline business, including recent acquisitions from ExxonMobil, was not adversely impacted by these market conditions.
- Acquisition Costs: Increased operating expenses and financing costs are attributed to recent acquisitions. Non-recurring investigatory, regulatory, and start-up expenses totaled approximately $1.8 million in 2010.
Risks and Contingencies
- Lyondell Chemical Litigation: In January 2011, the trustee for Lyondell Chemical Company's post-bankruptcy litigation trust sued the Partnership to recover approximately $6.0 million in payments. The trustee alleges the payments were made while the affiliate was insolvent. Global Partners believes the payments were for product received in the ordinary course of business and intends to defend the action. No provision for losses has been recorded.
- Forward-Looking Statements: Actual results may differ materially from estimates due to market volatility and other risk factors.
Investor Verification Checklist
- Audit Confirmation: Verify final audited results, as current figures are preliminary estimates subject to reconciliation.
- Acquisition Integration: Assess the long-term impact of recent acquisitions on depreciation, interest expenses, and operating margins.
- Distillates vs. Gasoline Performance: Monitor the divergence in performance between the distillates and gasoline segments.
- Legal Exposure: Track the status of the Lyondell Chemical Company litigation regarding the $6.0 million claim.
- Working Capital Trends: Analyze the drivers behind the significant reduction in cash used in operating activities for Q4 2010.