GLP - Earnings call transcript Q3 2018

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Operator

Good day, everyone. And welcome to the Global Partners' Third Quarter 2018 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call. [Operator Instructions] With us from Global Partners are President and Chief Executive Officer, Mr. Officer, Financial Chief Slifka; Ms. Eric Operating Daphne Mr. Foster; Chief Officer, President Counsel, Mr. Romaine; and General Vice Executive Mark and Edward Faneuil. At turn to the time, call this I over Mr. would like to Faneuil remarks. for opening Please sir. go ahead,

Edward Faneuil

Thank everyone. Good us for today. morning, you joining

guidance let begin, concerning oil making projections, EBITDA Laws. beliefs, and fuels, limited future results. be These assets future credit within conditions, our to a petroleum of Estimates assumptions available we within statements cycles, operational for may and the based financial assumptions include, we performance demand stock believe that gasoline subject but this me Because gasoline uncertainties, Before performance risks forward-looking will product of and Federal permitting and renewable business actual assurance financial of and range blend Partners. we performance are on the are to, assessment and estimates assumptions morning, meaning goals the statements and markets, Partners’ given curve, will and everyone Securities the are and Global such quarterly ranges. of that trends. We information weather, fall pricing Global as provide performance influence wide market, environment forward and no future not for and remind of regarding guidance market including the products regulatory currently crude business these reasonable could historical can facilities, which our utilizations are

announced to release of Global FD of the during results to Partners forward-looking publicly the concerning may made those that Regulation and Commission. through conference In calls material risk statements no including that will revision filings disclosure operations described obligation addition, factors, to, not in any but call. our performance for or our purposes comments public policy constitute news means revise any Securities of the will future releases, such Regulation limited with conference communicated other be the to in effect, publicly be is is Exchange With that results it or FD. undertakes subject today's

turn allow Executive Now, to Officer, to me our please and call the Eric Chief President Slifka. over

Eric Slifka

Edward. you, morning, you us. for joining Good everyone. thank Thank And

We're our the quarter in our of Honey this and economies in pleased noted reflected segment, QX Wholesale same in Farms morning, $XXX.X complementary which a with performance earnings last gas third QX, to was acquisitions Operations product our enhance XX% of and expand assets, due release of XXXX, Distribution the our our and year. results retail million unfavorable and and market markets acquisitions scale synergies, for footprint. margin focus drive the in performance terminal In of to strong the our leverage segment by stations driven margin Cheshire down making demonstrate these that of I strategic with year-over-year As segments in as purpose product our Oil period convenience in increased on Station Champlain stores conditions. the Gasoline

disruptions, similar QX experience disruptions. for 'XX margin was key the benefited which decline. in supply results weather-related did significantly 'XX from QX Our a not reason

$X in noted XXXX of strong fundamentals the of our end increasing morning's this I As guidance we full and release, our are business EBITDA are lower by the year million.

record November distribution opening we in distribution A of operating of per Turning unit units on The assets. common both on of be integrating to Series The the Series In November acquiring, expertise unit on paid will Xth. business closing, on to XXth and of XX.XX of of in will our November XX.XX unit Xst. on on our capitalize and distributions, units. as our as record November unitholders preferred announced holders distribution XXth continue we paid be common to the quarterly of distribution A a October, to per our quarterly initial

Looking turn for over M&A. I'll With ahead, organic that through and growth strategic Daphne on focused her to driving financial it investments remain we review. Daph?

Daphne Foster

you, everyone. Eric. And Thank good morning,

have Operating three million $XX.X million down This retail our $XX.X taxes, decreased market favorable store conditions million. partly gasoline the in expenses estate gasoline acquisitions to the million to to This product and million year, headcount, offset margin the $XXX real past quarter with reflects the was $XX.X Turning rent, Wholesale and and their to segment. maintenance $XXX.X was we quarter. primarily million. expenses. due gross third to in by $XX.X GDSO blendstocks, improved in results, made in over segment, gasoline convenience associated profit increased less our utilities Combined, our in margin

In increase and increased QX offset fees associated acquisition card $X.X million prices $XX.X in year-over-year. Champlain SG&A million in resulted gasoline $X expenses accrued incentive and in in addition, costs partly to the in higher by to fees. with and due Cheshire, decreases professional million credit comps

with XQ expenses. fleet costs. XXX compared along million a year to Adjusted a EBITDA and period 'XX million XXXX. $X.X of the the was $XX.X quarter $X.X and EPS of quarter $XX.X termination loss was period in XXXX. These in You'll sale future compared working these compared third provide revolver respectively. return incremental in loss higher and borrowings $XX.X in relates goodwill our obligations. related that in At X.X and same those $XX.X asset reduction agreement $XX.X million to expense include million in quarter earlier $XX.X XXXX was in railcar of us quarter a capital impairment service of distribution railcars to income we XXXX accrued railcar XXXX. increase financials of net obligation coverage and third third at to to to in in times. Net increased with rates. EBITDA TTM with voluntary results lease, related due future million notice XXXX. with million was the in was the Interest period The released in in million a XXXX resulting exit same with cars our million third $XX.X and from December QX $X.X to remaining the the related with the inventory million that $XX.X borrowings the of million costs and counterparty, million was with railcar in end an the early was million This associated for of on acquisitions, early third the period. termination in million services $XX.X services. XXXX disposition compared in the that we time pursuant of our higher net XQ of a million $X of in assets XXXX of the which with net management counterparty incremental same back the This included compared gain the $X.X a quarter accrued of with to sublease agreed interest

contract year's Station income to segment XXX at product sundries gallon and quarter as gallon lessee the acquisitions. margin quarter. fuel about gasoline increased to sites. the $X.XX GDSO margin of gasoline $XX.X $X.XXX improved last ‘XX from in XXX sales, largely non-strategic XQ X,XXX At Wholesale the to well less product per consisted sale the company-operated dealers per $X.XXX the $XX.X million primarily per of in agents, $XX.X due operations a of total of million. $X.X in sale favorable XXXX. to conditions partly Honey include This as with gasoline to which end million of product third a September commission gallon $XXX.X detail, GDSO due offset our $XX.X and and contribution our gasoline quarter in distribution third to margin decreased convenience The Champlain of $X.X acquisitions dealers to average of the million by Farms quarter total store gasoline million blendstocks to XXXX market product primarily XXX X,XXX. third XXX rental of million due increased $XX.X the segment, Oil to compares In margin the XXth, to Turning portfolio three The portfolio blendstock. was stores, our million, up in million Cheshire for and of the and margin

the During $X.X slightly but expiration improved $X.X Product the railcar by was XXXX. million lower from June QX residual product from and also million of down of to the crude margins was quarter products in take pay the in or adversely from $X.X XXXX and not Product present contract margin supply during from expenses, our termination margin third with in oil. to million customer. the affected distillates agreement pipeline benefiting benefited due 'XX oil Margin market less conditions primarily XXXX oils oil disruptions of Tesoro. with lease quarter our third particular weather-related crude related other favorable of one connection

due quarter. this in million million million, in segments about primarily margin product not acquisitions approximately addition, the to gallons, XX from to In consisting CapEx million and and gallons increase during our million gas segment, related XXXX, of CapEx $XX.X in supply during of by stations approximately Volume million, gallons maintenance third Total quarter $X.X volume margin benefited Wholesale, GDSO XXX to million, was the our XXX stations gallons of product increased $X.X in third related and third respectively. retail including weather-related our is present $X.X gallons. X.X and to while was XX increased $X.X million million our disruptions gas convenience our acquisitions CapEx CapEx of billion million increased maintenance bunkering quarter Commercial Year-to-date oil In excluding an stores residual Commercial activity. million which was $XX.X $XX.X million. CapEx also expansion $X.X to excluding expansion primarily stores. year's and

of to $XX to estimate in full versus capital XXXX million $XX million. $XX we million of expect maintenance of our the the year For prior range million $XX

million. $XX the continue expect million expansion CapEx range to We to $XX in of

to Turning sheet. our balance

September million $X.X we under of our of outstanding facility. XX, As total $XXX.X billion borrowings had

million, our This working and the facility the $XXX.X quarter, Oil increase in to from third the to million $XX.X Cheshire under as credit for million times issuance credit net $XX volumes inventory to of preferred million of acquisitions agreement $XXX both increased million end and of debt-to-EBITDA Borrowings at was respectively, Champlain attributed was units. quarter. the During A under due in Series Leverage approximately our $XXX by capital inventory. and is price. increased offset the an including proceeds borrowings to approximately reflecting defined Oil million primarily X.X $XX funded revolving approximately part facility in of

to as $XXX end million. by to guidance, to now to $XXX Full million million. are guidance of increasing EBITDA million XXXX $XXX our we XXXX of is Eric compared year Turning range year lower our the full million guidance prior $XXX $X noted,

of As disposition one-time the the as contingent first any $XX.X or loss and extinguishment long-lived quarter Volumetric this Tax guidance the Ethanol reminder, XXXX Credit. a to and gain of as related any million sale assets goodwill Excise in well the liability charges and from asset on excludes gain of impairment the recognized

Before I investor go we in know Q&A, that conferences. be to let you upcoming we wanted participating will to

be Finance Midstream Next the With and Raton questions. hosting at Lynch will one-on-one happy Conference that, in the Bank Dallas. to week, meetings at City. and In Conference will Operator? in will be MLP Boca I Capital RBC be Markets your December, New Wells the Merrill York America we of in we Leveraged Symposium Eric Fargo take

Operator

Thank with question-and-answer now from Raymond a [Operator session. of Brownlow James. conducting Ben Our you. question the line Instructions] first We'll be comes

Ben Brownlow

of drivers there? strategy? in balance segment, On year-over-year quarter were highest your that volume record the And but the then given comment there on that XX% same the last volume understand kind time close with since XXXX. supply the at some of the around to I disruptions pricing third that a also there the still margin low Wholesale was segment. you year Because growth and discussion Can

takes understand and Just the there? trying to puts

Daphne Foster

morning, Good it's Ben, Sure. Daphne.

took volumes. the to I due segment basically in of the blendstocks to operation advantage beginning of which more incent the for essentially to majority volume the of at of gasoline volume, in was tankage our the we additional take us and that when blending gasoline in generate year blending and allowed think terms the increase really markets

the for the reason volume. that's in So increase primary

market reiterate as we a think In had in gasoline XQ margin increase $X product year. experience, less I Harvey Certainly the of gasoline compared reminder, of favorable was million. August significant And margin, to conditions curtailed. have quarter, 'XX, about in Hurricane XXXX last as third this that And terms last a sort we product year supply Hurricane than year. Harvey we’ve that continued prompted of blendstock and in really increased to prices

relative increased expectations for more our that much However, than that. to quarter, it

other we weather-related we're or is like we what here infrastructure-related So normal saying for either weather, for now really, don't forecast don't temperature, disruptions. and budget

everyone's expectations, our under So come didn't much did while it as to come quarter relative the in in under expectations.

Ben Brownlow

assume guidance sequentially fourth Wholesale And implied, million in embedded $XX to that that’s you’re it assume is to baking quarter is to Okay, for $XX that of fair in million the contribution helpful. fair that improved it segment?

Daphne Foster

mean we're always done give floor we the and very are seen that of not it guidance the having I’ll past. Yes, specific I guidance. in comment timing and on segment which be swings comfortable made some our to of an we we’ve And going I can the and that you increased certainly But give just quarter-to-quarter a haven't example.

end prices variability instance inventory can of which by of For the the values, impact just if the the timing. caused hedge impact the that your quarter and can change, be and marks can at your be

Ben Brownlow

can from idea of And year-over-year what to or you of to is last think forward? And one some that to was is $XX great. there jump be growth OpEx contribution just going M&A give million one us an run-rate that me obviously XX% rate? in. back I'll million seasonality. just it forward growth, about kind quarterly the But given going of fair sort of quantify and Okay, The $XX thinking kind

Daphne Foster

you’re talking about Okay, so OpEx.

year, XXth $XX of So full or mean July look you would -- those last and yes, them reflect if million. say the it's quarter, year on does July at acquisitions, relative that quarter a to last million the OpEx not purchased quarter in $XX to full so, up we the I respectively. XXth from I not

make little is but also only card not on credit because The comment based price. it's a are be difficult fees volume, it's very that materially. to could only project light, OpEx I’ll not but So obviously on bit based

Ben Brownlow

Okay, great. Thank you.

Operator

Instructions] Baramov question [Operator Fargo. of you. the Wells with Ned Our Thank comes from line

Ned Baramov

for It's question. Thanks another your taking morning. Good wholesale one on the operations.

the think able of short-term differentials. So to given wide out peers real were your some of contracts sign I Bakken

wondering any just if you you successes was had have commercial about on talk front I So this could may recently?

Mark Romaine

Obviously we've pretty pretty several significantly. widening is Mark. last Yes, the crude over -- significant good market certain in has the discounts are And morning. This volatility seen some months. markets

So looks like of opportunity. I are on think opportunity paper it there certain and pockets there is

and due of related the and are to of railcar the transportation both side the one think way the on kind why they the of reason part diffs the challenges I challenges really railroad are, the of business.

and that we pursuing are the actually opportunities. We have still So, viable business. -- strategic we are are to we think assets marketplace, in today's

we in are that, we that. QX would that opportunities around to didn't So, around space. We allowed can at that pursuing us have any have anything looking capture are we of but I think whatever

Eric Slifka

is until there's but just done, so your the are would can't a What and Hi, little the lot crude I I discounts I And the the feels is is it's and lot very spreads say feel Eric would feels as can really anything cut of particularly inbounds. call, well more -- Slifka. money think busy. different you of to active it you and bit as because just And about I last market pricing large. relates what sort market say the it more a spoke a it

fielding we And related lot that on all so a of the have that more are inquiries to crude. we're assets

Ned Baramov

CapEx that's I guidance I are. Okay, some any in there. with already you quarter requirements reflected those Are helpful. for these last your talked growth associated third-party potential there of year? opportunities? Are guess And they there the about think capital opportunities

Eric Slifka

we're So, required, it, going to a would way how to We're is then I in there's say to what it. about on going do contract other finance obviously What we're talk be we the capital right? and have best by about very to get if we're going going the of to is, paid any it. And side fashion be it. that to secure at try to look cautious

Mark Romaine

CapEx. being think That are the require Yes. there said, marketplace in though, opportunities I that won't

think capitalize be I not contract do facilities If there's today, capture that any anything money -- we participate there’s it'll with can spend right backed we a that here. obviously have can and but say Eric our to is -- to or to so -- if by upside what beyond it’s done there.

Eric Slifka

West quantities run through crude have of they've well. as it assets They've before from all to it through and run Coast. crude these to the all material even East Bakken And the Coast run

way So structured the are are capable the today. all they assets

Ned Baramov

guess is action. does immediate issue a and to But me, remains if point I for last IDRs And cash plans structural your address a it it. not burden on at can update Got -- distributions -- the an one I and maybe moving you a sector require cash from sorry, but the it. agree significant is that this quickly is not provide for not IDRs? flow

So any thoughts on helpful? be this would

Daphne Foster

just evaluate to financial both just opportunities and options from maximized I’d returns all and the Yes have really a also we structural say always and standpoint? business

Eric Slifka

cross-ownership that. partner. there the is I'll between general add the unit and little a mean essentially I to between

And so deals how to done the get the And that's to interests out on. focused returns. are we're to what figure get good

Ned Baramov

Got it. all I had. fair. you. Thank That's That's

Operator

RBC. of question Hardy is from next the line with Our Will

Will Hardy

could perhaps Coast And your much in or that on had the there little I that. you going Portland is and about bit Bakken the you then talk up anything on what's with heard going Eric, the pick a there. West about with haven’t assets? assets

Just kind those things? address two of

Eric Slifka

what is place enough something just screaming is, I to happen. of the going take take of lot there there’s to B, position that because a just like would would mean for things look say broad I A, and that. been are some the is inquiries; I even Yes discounts think on broadly maybe we to feel are spreads

could that crude, it an site. back swing the think use I But ethanol that transload possibility Coast is as to continue right? a West We there on to

Will Hardy

Thank it. you. Appreciate

Operator

is The Gyure Mike line from of the next with Janney. question

Michael Gyure

I noted little segment you platform? there? the a driving maybe power, purchasing the your acquisitions think margins? it benefits seeing integrating talk acquisitions, is that. benefit, you the I in where the is But combination is guys the specifically at to improvement bit driving about you I guess of can the guess related the what's GDSO Yes, it the operations

Eric Slifka

just up could I'm hear barely Could speak again? you and ask I Sorry. you Yes. question sorry. the

Michael Gyure

sorry the Yes, is segment, acquisitions. to the of the note about GDSO related you that. margin improvement some In

what that’s If integration, different? running it it that is different, driving is talk that’s specifically the operations you purchasing about could is

Eric Slifka

as we're with scale marketplace, every mean, -- what at, very and distributors because I large not size have particularly contracts and smaller have we these with Yes large we're they're almost the of multiple suppliers and think with good we're in the what we them, supplier. most

And we so buying. these suppliers. supply, what contracts big not at fuel. we terms look of it guys an in with we go we and in have can contracts, we're exactly purchase at when the I'd we can stores but that We pretty say then that save at C also business much and look the it, bigger of acquisition And look we're than as we're into most goes the know

that think well. we structure cost So we could streamline as

Michael Gyure

on Great. or do you And -- weather I talk mentioned your the then can weather one guess you how don't into for again factor you guidance, about Daphne maybe guidance?

Daphne Foster

Yes, we to always year. look normal forward a

that’d weather be normal So disruption. significant no and

the how that’s obviously and that's that's that's forecast, helpful cold if the less fourth and it's particularly we particularly it’s then we helpful. warm, first if So in how And quarter budget.

Michael Gyure

Thank Great. you.

Operator

Our with question Stifel. line from comes Selman the next of Akyol

Selman Akyol

Thank you.

how the EBITDA can quarter? the for of to contributed much you just say First acquisitions all,

Daphne Foster

ceiling they and about saw guidance those of in in quarter, at costs have it contemplated million. we quarter, say doing we the million. out that you guidance, moved approximately acquisitions came would the one-time last that point will also $X.X we And that I and transaction on were we to that We $X in they haven't reflect were the part broken but when

we pleased So that. say of that with to-date. I all are think can I I'll about the performance the acquisitions that's say

Selman Akyol

talk Alright. M&A of And outlook and then can you about your that? just kind additional for

Eric Slifka

transactions. I with comfortable transaction. over I what be because the lots would So we're said is continues I think not And to busy. winning seeing retail we're We're last paying on side, that, the every what very call of it we're say

and be to full so busy, pretty it continues pipeline. a there’s And

Selman Akyol

thoughts initial Okay. on XXXX? And then last one. Any

Eric Slifka

it relates to? As

Selman Akyol

like As like anything it that relates say? guidance, you'd to to

Daphne Foster

out year Yes. at ‘XX No, put the call for typically we K. the for guidance or for our

yet. won’t we be putting guidance So out

Selman Akyol

you, Thank Daph.

Operator

is come next Management. Lin question HITE of line from Hedge The Assets with Shen

Lin Shen

good Thanks Hey, call. for taking morning. the

the see about market to Also you wondering, the of heating And talked call, recently are think to purchase. limiting just in now? attractive the also distillate peers going blending their see convergence in Northeast your their to see opportunity. in of challenge a year. same they sulfur One of market, they oil thing their I'm their that the rest they market less specification the do their

Mark Romaine

oil Yes, heating good morning. England. spec has New on It's Mark. Yes, in sulfur the changed

may a that impact the to But is is all move taken we same to advantage don't limit past. fact. -- move major deal. some don't as that the the or XXX meaningful, mean it business. PPM our And XXX required from meet XXX does PPM the it blending of was the -- big have So I we a see I the down we're don't in to of to we specs. see opportunities as XX

I normal for provides it a will And for be with So that less respect is main standpoint. a QX, from then quarter that us us. driver opportunity, don't to our as a expectation distillate see certainly but QX

changes necessarily don't there. any I see So

Lin Shen

great. Thank Okay, you.

Operator

Thank turn closing Slifka comments. to you. floor to like the I Q&A. That concludes Mr. back our for and

Eric Slifka

for you And this keeping updated joining you our Thank on us forward we to look morning. progress.

Operator

concludes today's This teleconference.

you your participation. your for at this thank disconnect may You time. And lines

Global Partners (GLP) 8 Nov 182018 Q3 Earnings call transcript