Global Partners LP (GLP) Q3 2020 Earnings Call Transcript


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World Companions LP(NYSE:GLP)
Q32020 Earnings Name
Nov 6, 2020, 10:00 p.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Members

Ready Remarks:

Operator

Good day, everybody and welcome to the World Companions Third Quarter 2020 Monetary Outcomes Convention Name. [Operator Instructions]. There might be a possibility for questions on the finish of the decision. [Operator Instructions]. With us from World Companions are President and Chief Govt Officer, Mr. Eric Slifka; Chief Monetary Officer, Ms. Daphne Foster; Chief Working Officer, Mr. Mark Romaine; and Govt Vice President and Common Counsel, Mr. Edward Faneuil.

At the moment, I want to flip the decision over to Mr. Faneuil for opening remarks. Please go forward, sir.

Edward FaneuilGovt Vice President and Common Counsel

Good morning, everybody. Thanks for becoming a member of us right this moment. Earlier than we start, let me remind everybody that this morning we might be making forward-looking statements throughout the which means of federal securities legal guidelines. These statements might embody, however will not be restricted to projections, beliefs, objectives, estimates regarding the future monetary and operational efficiency of World Companions.

Ahead-looking statements are based mostly on assumptions relating to market situations such because the crude oil market, enterprise cycles, demand for petroleum merchandise, together with gasoline and gasoline blendstocks and renewable fuels, utilization of belongings and amenities, climate, credit score markets, demand for c-store choices, the regulatory and allowing atmosphere and the ahead product pricing curve, which may affect quarterly monetary outcomes.

These statements contain vital dangers and uncertainties, a few of that are past the Partnership’s management, together with with out limitation, the influence and period of the COVID-19 pandemic, uncertainty across the timing of an financial restoration in the US, which can influence the demand for the merchandise we promote and the providers we offer.

Uncertainty across the influence of COVID-19 to our counterparties and our prospects and their corresponding capability to carry out their obligations and/or make the most of the merchandise we promote and/or providers we offer. Uncertainty across the influence and period of federal state and municipal rules and administrators associated to the COVID-19 and assumptions that would trigger precise outcomes to vary materially from the Partnership’s historic expertise and current expectations or projections.

We imagine these assumptions are affordable given at present out there data and our evaluation of historic tendencies. As a result of our assumptions and future efficiency are topic to a variety of enterprise dangers and uncertainties, we will present no assurance that precise efficiency will fall inside any steerage ranges. As well as, such efficiency is topic to threat components, together with, however not restricted to these described in our filings with the Securities and Alternate Fee.

World Companions undertakes no obligation to revise or publicly launch the outcomes of any revision to the forward-looking statements that possibly made throughout right this moment’s convention name. With Regulation FD in impact, it’s our coverage that any materials feedback regarding future outcomes of operations might be communicated by information releases, publicly introduced convention calls or different implies that will represent public disclosure for the needs of Regulation FD.

Now, please enable me to show the decision over to our President and Chief Govt Officer, Mr. Eric Slifka.

Eric SlifkaPresident and Chief Govt Officer

Thanks, Edward. World continues to carry out properly, executing on market alternatives related to COVID-19. Our vertically built-in portfolio of provide, terminaling, storage and retail belongings are a part of the important infrastructure, essential to energy on a regular basis life, as we proceed to ship items and providers to individuals, communities and companies throughout the markets we serve.

I take advantage of the time period important infrastructure as a result of a lot of our quantity is consumed as a primary on a regular basis want. Households are residence now greater than ever and we offer the gasoline that warms this growing demand. We additionally energy business, industrial and authorities prospects, together with federal state and native fleets, utilities, first responders and others whose autos are on the highway day by day.

As well as, our community of comfort shops has develop into important markets for these wishing to remain near residence and safe their primary items in a smaller setting. We have now tailored to make sure now we have the merchandise to fulfill these prospects’ wants. Our robust community and flexibility allow us to benefit from alternatives available in the market to develop our enterprise organically and thru acquisitions.

To that time, the M&A pipeline could be very energetic and we proceed to guage alternatives with the potential to broaden our geographic footprint complement our service choices and drive profitability and development. We proceed to prioritize the security of our workers, visitors, prospects and suppliers. Our office-based workers efficiently transitioned to a distant work atmosphere with no disruption to our enterprise. All of our fuel stations, C-stores and gasoline terminals are open and absolutely operational.

Turning to latest highlights. Final week, the Board of Administrators of our normal companion elevated the quarterly money distribution on our widespread items to $0.50 per unit or $2 on an annualized foundation. The distribution might be paid on November 13th to unitholders of file as of the shut of enterprise on November ninth. On our Q2 name, we mentioned the signing of a long-term contract with a number one downstream vitality firm to throughput renewable diesel at our rail and waterborne terminal on the West Coast. I am happy to announce that the primary shipments of renewable diesel are anticipated to come back by the terminal this quarter.

This enterprise is a pure extension of our years of experience in throughputting, sourcing and distributing renewable fuels and our dedication to offering a bridge to low-carbon fuels. We proceed to extend our flexibility to maneuver renewable fuels to serve rising demand and doing so at scale. For instance, we proceed to introduce modifications to our terminal infrastructure to extend the power to produce renewables.

Earlier than turning it over to Daphne, I need to word the appointment of Robert Owens as the most recent member of our Board. Bob was elected in October served as President and Chief Govt Officer of Sunoco LP from 2012 till his retirement in 2017. He brings to the Board greater than 40 years of entrepreneurialism, innovation and success in main and rising vitality sector companies and we sit up for benefiting from his perspective.

With that, now let me flip the decision over to Daphne for her monetary overview. Daphne?

Daphne FosterChief Monetary Officer

Thanks, Eric and good morning everybody. Echoing Eric’s feedback, we have carried out properly each financially and operationally whereas navigating on this distinctive atmosphere. We proceed to handle prices and to leverage the efficiencies our vertically built-in terminal, distribution, provide and retail community to generate robust efficiency.

As we undergo the numbers for Q3, remember the fact that internet revenue, EBITDA and distributable money circulate in final yr’s third quarter included a $13.1 million loss on the early extinguishment of debt associated to the repurchase in July 2019 of our 6.25% senior notes due 2022. our outcomes internet revenue for the third quarter of 2020 was $18.2 million in contrast with $15.1 million in the identical interval of 2019.

Adjusted EBITDA was $65.9 million within the third quarter of 2020 versus $66.1 million within the yr precedent days. DCF was $31.Three million within the third quarter of 2020 in contrast with $30.Four million in the identical interval of 2019. Trailing 12-month distribution protection on the finish of the third quarter was 2.Four occasions after factoring in distributions to the popular unitholders that protection was 2.Three occasions.

Quantity within the quarter declined 236 million gallons to 1.Four billion gallons from 1.6 billion in the identical interval of 2019 with decreases throughout all segments. Wholesale phase quantity was up 16% or 158 million gallons on account of a decline in gasoline and gasoline blendstocks partially offset by the rise in crude oil and different oils and associated merchandise.

Quantity within the GDSO phase declined 11% or 47 million gallons primarily reflecting a decline in car journey, largely as a result of influence of COVID-19. Quantity in our business phase declined 18% or 31 million gallons primarily on account of declines in gasoline and bunker gasoline largely as a result of influence of COVID-19.

Turning to our phase margins. GDSO product margin was down $9.eight million to $158.9 million reflecting decrease gasoline quantity and diminished C-store exercise on account of COVID-19 partly offset by greater gasoline margins. The gasoline distribution contribution to GDSO product margin decreased $6.2 million to $101.Four million within the third quarter, reflecting the 11% decline in quantity, offset partly by a rise of $0.015 per gallon in gasoline margin to $0.269 per gallon from $0.254 per gallon within the third quarter of 2019.

The $0.254 per gallon margin in final yr’s third quarter was positively impacted by declining wholesale gasoline costs. Station operations product margin, which incorporates comfort retailer gross sales, sundries and rental revenue, declined $3.6 million to $57.5 million, primarily on account of much less visitors at our C-stores. On the finish of the quarter, our GDSO portfolio consisted of 1,542 websites, comprised of 278 Firm-operated shops, 272 commissioned brokers, 209 lessee sellers and 783 contract sellers.

Trying on the Wholesale phase, third quarter 2020 product margin decreased $6.6 million to $27.6 million, primarily reflecting much less favorable market situations than in Q3 2019. Gasoline and gasoline blendstocks product margin decreased $3.9 million to $16.Three million. Crude oil product margin elevated $290,000 [Phonetic]. Product margin from different oils and associated merchandise was down $Three million to $14 million, primarily in residual fuels. Business phase product margin declined $4.Four million to $2.eight million, primarily on account of a lower in bunkering exercise.

Turning to bills. Working bills had been down $5.6 million to $82.2 million within the third quarter of 2020 on account of decrease bills at our GDSO websites. This lower mirrored partly decrease bank card charges as a result of discount in quantity and worth, decrease wage expense due primarily to diminished retailer hours and decrease upkeep and restore bills.

SG&A bills had been down $2.1 million to $43.2 million within the third quarter, primarily on account of a lower in accrued incentive comp. Curiosity expense of $19.9 million within the quarter was down $2.2 million year-over-year on account of decrease common balances on our credit score amenities and decrease rates of interest. Capex within the third quarter was roughly $17.9 million consisting of $12 million of upkeep capex and $5.9 million of enlargement capex, primarily associated to our fuel station enterprise. By the primary 9 months of 2020, now we have invested $24.eight million in upkeep capex and $14.eight million in enlargement capex.

For full yr 2020, as we work to meet up with the pause we imposed on discretionary expenditures earlier within the yr, we proceed to venture upkeep capex of roughly $45 million to $55 million and enlargement capex excluding acquisitions of roughly $30 million to $40 million. Nearly all of these investments relate primarily to our gasoline station and comfort retailer enterprise.

Turning to the steadiness sheet leverage which is outlined in our credit score settlement as funded debt-to-EBITDA was roughly 3.2 occasions on the finish of the third quarter. We proceed to have ample extra capability underneath our credit score facility. As of September 30, 2020, complete borrowings excellent underneath the credit score settlement had been $348.1 million, together with $160.1 million underneath our $770 million working capital revolving credit score facility and $188 million excellent on our $400 million revolving credit score facility.

In October, we accomplished the sale of our beforehand introduced non-public providing of $350 million in combination principal quantity of 6.875% senior unsecured notes due 2029. The web proceeds from the providing had been used to fund the redemption of the $300 million 7% senior notes due 2023 and to repay a portion of borrowings excellent underneath our credit score settlement.

Within the fourth quarter of 2020, we count on this redemption will end in a lack of roughly $7.2 million from the early extinguishment of debt related to the decision premium in addition to the write-off of remaining unamortized deferred financing charges. Earlier than I flip the decision again to Eric, I need to let you recognize that within the coming weeks, we might be assembly with buyers on the RBC Midstream and Power Infrastructure Convention, the Wells Fargo Digital Midstream and Utility Symposium and the BofA Securities Leveraged Finance Convention.

If you happen to’re taking part we sit up for the chance to fulfill with you then. Eric?

Eric SlifkaPresident and Chief Govt Officer

Thanks Daphne. In abstract, our 2020 efficiency stays largely depending on the extent period of COVID-19. Whereas we proceed to see our built-in enterprise mannequin and diversified product portfolio as long-term strategic belongings for the partnership, ongoing uncertainty concerning the financial results of COVID-19 proceed to restrict our near-term visibility.

With that now, Daphne and I might be completely satisfied to take your questions. Operator? Operator, are you there?

Questions and Solutions:

Operator

Sure, I am sorry. Thanks. We’ll now be conducting a question-and-answer session. [Operator Instructions]. Thanks. Our first query comes from Selman Akyol with Stifel. Please proceed along with your query.

Timothy HowardStifel Nicolaus — Analyst

Hey, good morning. That is Tim on for Selman. I do know you guys type of talked about the M&A market was beginning to be somewhat energetic. Simply questioning, if you happen to may discuss broadly about any alternatives you are at present seeing?

Eric SlifkaPresident and Chief Govt Officer

Yeah. I imply — that is Eric, what I might say is, clearly, I am unable to get into something particular. However I might say very broadly what we like concerning the — let’s — we’ll discuss particularly concerning the retail enterprise is it is very broadly owned. There’s numerous smaller operators which might be on the market, household run companies, generational in some kind. And there appears to only be numerous exercise when it comes to individuals contemplating both promoting their companies, altering their operations, doing issues otherwise than they’ve prior to now. And so once we say energetic, that is actually how we describe it.

I might additionally say there continues to kind of be I would say numerous exercise not simply round M&A, but in addition across the concepts and ideas of renewables. And I am not precisely positive the place that finally takes the Firm, however I do imagine it is a possibility, as a result of it is new, it is completely different and there is numerous curiosity and exercise round transferring, producing and delivering these sorts of barrels. So finally, I am unsure of the precise position that may play there. However I can inform you we are attempting to ensure that we’re concerned in alternatives that will match the Firm.

Timothy HowardStifel Nicolaus — Analyst

Received it. That was very useful. After which only one final one for me, so simply questioning how gasoline gross sales at your retail sides have trended for the month of October. Simply questioning if you happen to’re seeing somewhat enhance over 3Q, or if it has been simply pulling up? Simply curious in your ideas there?

Eric SlifkaPresident and Chief Govt Officer

Mark, Daph, do you guys need to deal with that?

Daphne FosterChief Monetary Officer

Certain. I am completely satisfied to. I believe for the third quarter and I believe into the fourth quarter which means October, it is actually been kind of hanging at mid double-digit percentages down year-over-year. Have not seen a lot change thus far, and positively what we noticed within the third quarter and have continued to see, though now view on the long run is that margins proceed to be useful to offset a few of that shortfall in quantity.

Eric SlifkaPresident and Chief Govt Officer

You understand what, Tim, it is Eric I can say the market feels somewhat smooth, proper? So — and if you happen to went — you kind of look month-to-month there have been occasions the place you had month-to-month will increase in demand, proper? And it feels, prefer it’s kind of simply smooth and heading somewhat bit within the different route, proper?

Timothy HowardStifel Nicolaus — Analyst

Received it. That is tremendous useful. That might be it for me guys. Thanks for the time.

Eric SlifkaPresident and Chief Govt Officer

Thanks, Tim.

Operator

[Operator Instructions]. There are not any additional questions presently. I want to flip the decision again to Eric Slifka for any closing feedback.

Eric SlifkaPresident and Chief Govt Officer

Thanks for becoming a member of us this morning. With Thanksgiving quick approaching and the social limitations of COVID-19 nonetheless very a lot with us, this can undoubtedly be distinctive vacation season. On behalf of everybody at World, we hope that you’ll keep protected, wholesome and bridge a bodily distance with household and associates by holding in contact as a lot as potential. We sit up for holding you up to date on our progress. Thanks.

Operator

[Operator Closing Remarks].

Length: 22 minutes

Name contributors:

Edward FaneuilGovt Vice President and Common Counsel

Eric SlifkaPresident and Chief Govt Officer

Daphne FosterChief Monetary Officer

Timothy HowardStifel Nicolaus — Analyst

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