Edward Faneuil - EVP and General Counsel Eric Slifka - President and CEO Daphne Foster - CFO Mark Romaine - COO.

Gabe Moreen - Bank of America Merrill Lynch Lin Chen - Hite Hedge Asset Management.

Good day, everyone and welcome to the Global Partners Third Quarter 2015 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Chief Financial Officer, Ms.

Daphne Foster; Chief Operating Officer, Mr. Mark Romaine; Executive Vice President and Chief Accounting Officer, Mr. Charles Rudinsky; and Executive Vice President and General Counsel, Mr. Edward Faneuil. At this time, I would like to turn the call over to Mr. Fanueil for opening remarks. Please go ahead, sir..

Good morning, everyone. Thank you for joining us. Before we begin, let me remind everyone that this morning we will be making forward-looking statements within the meaning of federal securities laws.

These statements may include, but are not limited to projections, beliefs, goals and estimates concerning the future financial and operational performance of Global Partners.

Estimates for Global Partners future EBITDA are based on a number of assumptions regarding market conditions, including demand for petroleum products and renewable fuels, commodity prices, weather, credit markets, the regulatory and permitting environment and the forward product pricing curve, which could influence quarterly financial results.

Therefore, Global Partners can give no assurance that our future EBITDA will be as estimated. The actual performance for Global may differ materially from those expressed or implied by any such forward-looking statements.

In addition, such performance is subject to risk factors, including, but not limited to those described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements that may be made during today's conference call.

With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through news releases, publicly announced conference calls or other means that will constitute public disclosure for purposes of Regulation FD.

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

Eric?.

Thank you, Edward. Good morning and welcome to this morning's call to discuss our third quarter 2015 results. Overall, positive results in our gasoline distribution and station operation segment offset the continuing weakness in our wholesale segment in the third quarter.

GDSO product margin grew year-over-year by $57.1 million or 71% to $137.3 million, primarily driven by the 2015 acquisition of Warren Equities and the Capitol Petroleum portfolio. That favorable performance was offset by declining product margin in our wholesale segment, which was down $49.6 million or 58% from the third quarter of last year.

Those results reflect less favorable conditions in the wholesale gasoline and gasoline blendstocks market, as well as tighter differentials in the crude oil market. Let me provide a bit more color on our GDSO operations. Through the first nine months of 2015, product margin is up nearly $138 million, or 70% to $334 million.

Gasoline product margin over the nine-month period is up 60% to $203.2 million compared with $126.6 million for the same period in 2014.

Product margin in the station operations portion of our GDSO business, which includes margin from C-store sales, rental income and sundry sales increased 88% for the nine months to $130.8 million from the $69.7 million in the comparable period last year. The results reflect the successful execution of our GDSO growth strategy.

The integration of Warren and Capitol is substantially complete and the assets are contributing to our performance. We continue to identify and pursue new to industry and raise and rebuild projects. Our renovation of all 23 Connecticut Turnpike gasoline and C-store locations is now complete.

On the wholesale front, we face continuing market headwinds caused by tighter crude differential. These narrow spreads are reducing rail movements to the coasts. Worldwide crude markets are oversupplied.

As a result, it has generally been more cost effective for East and West Coast refiners to source waterborne imports rather than receive crude by rail.

While there is no certainty as to when these market conditions will change, we continue to believe that over the long term rail will play a role in the movement of domestically produced crude to high netback markets such as the East and West Coasts. Now let me update you on several growth projects.

At our CPBR terminal in Clatskanie, Oregon, our dock expansion project is underway, following receipt earlier this year of a permit from the US Army Corps of Engineers.

The project, which is scheduled for completion in Q3 of 2016, will enable us to handle Panamax size vessels at the facility and like our rail terminal in Albany CPBR has the flexibility to handle either crude or ethanol.

On the Gulf Coast, we continue to actively pursue permits for the development of our planned multiproduct waterborne rail facility in Port Arthur, Texas.

Turning to our distribution, in October, our Board increased the quarterly cash distribution by 6.9% over the quarterly distribution paid in November 2014 to $69.75 per unit, which is $2.79 on an annualized basis. Now let me turn the call over to Daphne for her financial review.

Daphne?.

Thank you, Eric and good morning, everyone. Let me start with some color on our third quarter performance. Combined product margin of $178 million was up slightly from the $170 million achieved during the same period last year.

This result reflects growth in our GDSO segment, primarily due to the Warren Equities acquisition in the first quarter of this year, largely offset by tighter margins in the crude market and less favorable conditions in wholesale gasoline and gasoline blendstocks.

Product margin in the GDSO segment improved $57 million, or 71%, while product margin in the wholesale segment declined $49.6 million or 58%.

While expenses increased year-over-year to support the growth in the GDSO segment, weaker performance in the wholesale segment was the primary reason for the decline in third-quarter EBITDA, which decreased $15.4 million to $59.3 million.

The greater decline in DCF of approximately $21.9 million to $29.6 million can largely be attributed to interest expense increasing year-over-year due to the Warren and Capitol acquisitions, as well as the issuance of new bonds in June.

Net income for the third quarter decreased by $34 million to $8 million reflecting the additional impact of acquisition-related depreciation.

Looking at our segments in more detail, product margin from gasoline distribution in our GDSO segment increased $34 million to $88.3 million, reflecting contributions from Warren and the Capitol Petroleum portfolio acquired June 1. Falling wholesale gasoline prices during the quarter positively impacted margins.

Fuel margin increased from $0.202 per gallon last year to $0.218 per gallon this year, reflecting not only falling wholesale gasoline prices, but also the increase in the number of company-owned and operated sites where we recognize higher margins.

Product margin from station operations was $49 million, an increase of approximately $23 million, or 89%, from last year's third quarter, primarily reflecting the additional margin from the Warren company-operated C-store sites and rental income from lessee dealers and commissioned agents. Capitol also contributed rental income.

Volume in the GDSO segment was approximately 406 million gallons in the third quarter, an increase of 137 million gallons, reflecting the Warren acquisition and to a lesser degree Capitol.

Our GDSO portfolio at the end of the quarter consisted of 285 company-operated locations, 280 commissioned agents, 286 lessee dealers and 679 contract dealers for a total of 1530 sites.

Turning to the wholesale segment, crude oil product margin of $15.7 million was down $29 million from the previous year due to tighter margins caused by unfavorable market conditions as the Mid-Continent barrel did not discount sufficiently to make the rail move to the coasts competitive.

Margins were negatively impacted by fixed costs, including those related to railcar leases. Logistics volume was lower primarily due to declining contractual commitments with one particular customer. Additionally, as previously disclosed, we had a customer default on a contractual commitment on the West Coast.

Gasoline and gasoline blendstocks margin declined from $25.4 million in the third quarter of 2014 to $7.2 million in this year's third quarter due to less favorable market conditions in both gasoline and ethanol.

In the third quarter of 2014, our gasoline product margin was positively impacted by supply tightness caused by refinery shutdowns and unplanned outages. In contrast, in the third quarter of this year, high refinery runs created excess supply, which negatively impacted product margins.

Additionally, the shift in the ethanol market from tighter supply in the third quarter of 2014 to a surplus in the third quarter of 2015 contributed to the decline in product margins. The margin for other oils and related products of $12.4 million was down $2.4 million year-over-year.

This decrease reflects less favorable market conditions, including an oversupply distillate market, partly offset by a stronger performance in our propane business.

Volume in the wholesale segment decreased 242 million gallons to 852 million gallons in the third quarter of 2015, primarily due to a change in supply logistics for a particular gasoline customer and the discontinuation of a small discrete blendstocks distribution activity, both of which occurred at the beginning of the year.

The decline in the volume in the wholesale segment offset the increase in our GDSO segment volume. Our commercial segment product margin was up slightly to $6.1 million.

Turning to expenses, SG&A expenses increased $1.1 million, or 3%, to $42.5 million from the third quarter of 2014, primarily due to $5.1 million in increased salaries and wages relating to the Warren acquisition offset by a $3.9 million decrease in accrued incentive compensation and a $1 million decrease in professional fees.

Operating expenses increased $24 million or 45% to $77.3 million from the third quarter of 2014 due to the addition of Warren and to a lesser extent Capitol. Acquisition-related costs were immaterial in the third quarter.

Interest expense increased $8.3 million to $20.6 million from $12.3 million in the third quarter of 2014, reflecting the $300 million 7% notes issued in June of this year and incremental borrowings for the Capitol and Warren acquisitions.

In addition, $2.4 million relates to the reclassification of rental expense to interest expense in connection with the financing obligation recognized as part of the Capitol acquisition. This reclassification will continue for the term of the Capitol unitary leases thereby reducing operating expense and increasing EBITDA with no net impact to DCF.

Total CapEx for the quarter was approximately $23.3 million, $9 million of which was maintenance CapEx, the majority of which consisted of investments in our gasoline stations, as well as investments in IT.

Expansion CapEx was $14.3 million and included $9 million in investments and gas stations and C-stores, including work on raise and rebuild and co-branding investments. We continue to have ample borrowing capacity under our committed bank facility.

At September 30, we had borrowings of $522.9 million under our $1.775 billion committed bank facility, which consisted of $268 million under our $775 million revolving credit facility and $254.9 million under our $1 billion working capital facility. Leverage, based on funded debt to EBITDA, was 3.5 to 1 at the end of the quarter.

Funded debt reflects borrowings to fund our acquisitions and fixed assets and excludes working capital borrowings. This is consistent with how our bank agreement calculates leverage. Total partners equity was $718.5 million.

As I mentioned last quarter, you will note the inclusion of an $89 million liability on our balance sheet classified as a financing obligation. This relates to the Capitol Petroleum transaction and is associated with certain properties previously sold by Capitol in two sale-leaseback transactions that did not meet the criteria for sale accounting.

As a result, the acquired leased assets require capitalization on our balance sheet. The financing obligation does not represent incremental borrowed money and our credit agreement excludes this obligation from our leverage calculation.

Turning to guidance, we are affirming our expectation for full-year 2015 EBITDA in the range of $214 million to $234 million. As Eric mentioned, the integration of Warren and Capitol is substantially complete. In our wholesale segment, tighter crude differentials continued to negatively impact results.

Before we go to Q&A, I just wanted to remind you that we will be participating in two upcoming conferences before the end of the year.

On December 4, we will be at the Bank of America Merrill Lynch Leveraged Finance Conference in Boca Raton, Florida and on December 8, we will be participating in Wells Fargo's 14th Annual Energy Symposium in New York City. You will be able to find presentation materials for those events on the Investor Relations section of our website.

Now Eric and I will be happy to take your questions.

Operator?.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of Gabe Moreen with Merrill Lynch. Please proceed with your question..

Hey, good morning, everyone. Nice quarter. Couple questions from me.

In terms of the outlook on the wholesale blending business -- the gasoline blending business rather, can you talk about potential sequential improvement there? Had you hedged at all in terms of butane blending? And then I guess ethanol margins have improved a little bit here, but if you can give us some color, that would be great..

Hey, good morning, Gabe. This is Mark. I think that it's worth pointing out -- I think Daphne tried to capture it in her remarks, I think it's worth pointing out that gasoline and gasoline blendstocks for Q3 really performed as expected.

The delta between Q3 '14 and Q3 '15 was really driven by some extraordinary strength in '14 -- in Q3 2014 due to some refinery outages and tighter supply conditions. And so what we recognized in Q3 of '14 was some abnormally high margin contribution from those segments or those products.

Q3 '15 was really kind of what we had expected and moving forward, the market is -- although it's a lot softer this year, is in line with expectations. If anything right now, we are probably going to be able to recognize some opportunity from some contango across multiple product lines..

Got it. Thanks Mark. Appreciate those comments on the contango reappearing.

And then turning to crude by rail, can you just confirm that this quarter kind of represents going down to your MVCs? And then I am curious in terms of managing expenses in that business, you had talked about I guess the railcar leases and it sounds like maybe utilization here isn't full on those railcars.

Are any of those leases rolling off and how do you think about managing that expense in the current spread environment?.

Yes, this is Daphne. In terms of railcar costs, those are disclosed in our financial statements, specifically really in our K. Certainly the aggregate amount includes cars for use in our refined products and ethanol and NGL, as well as obviously in our crude business with the largest percentage of those in crude service.

Any cost really associated with undue utilization of those railcars is really reflected in our results in the quarter, as well as in our guidance for the year..

Okay. Then I guess also from me, in terms of the distribution increase for this quarter, I noticed there was a bit of a tick down in terms of year-on-year growth rate.

Can you just talk about the discussions with the Board in terms of the distribution and the trajectory from here?.

I guess all I can comment on, as you know, the Board sets a dividend each quarter and the distribution, yes, it increased less than it has in the past several quarters when it was a little over an 8% increase on a year-over-year basis and this quarter, it was a 6.9% increase and our coverage today is 1.5 times..

And Gabe, it is a reflection of some of the headwinds that we are receiving, particularly in that crude business as well..

Understood, understood. Thanks, Eric. And one last one can, if I could. Look, there is obviously a lot of dislocations in the MLP and midstream markets; although I would argue it seems like the market for C-store and retail and downstream stuff is okay.

Can you just talk about M&A stuff you are seeing out there at the moment? I hate to ask the generic M&A question, but I will given how dislocated things are at the moment..

It continues to be active. It is really a space where there are lots of companies and businesses for sale of various sizes and there are always conversations going on around assets that are for sale. So we try to look at it as much as possible.

We try to see every deal that's out there and then as I've said in the past, the ones that really fit us are the ones I think that we will at least be competitive on..

Got it. Thanks, Eric. We will stay tuned..

[Operator Instructions] Our next question comes from the line of Lin Chen from Hite Hedge Asset Management. Please proceed with your question..

Hey, Good morning. Thanks for taking my question. You mentioned that there was one customer default on the West Coast. I'm assuming that's for your crude by rail business.

I'm just wondering do you think you can recover the loss maybe in the future or do you think it is hard to recover the loss?.

Well, just going forward, obviously, we are looking to replace the business and put other customers in there and we continually charge ahead on that in terms of anything with that customer. We will do everything we can to figure out a way to collect as much as possible, if any..

Okay.

And also, I don't know, did you already disclose that further MVC contract you have for crude by rail, especially for Albany Terminal? How many years contract you still have left over?.

How many years left on the contract?.

Yes, we are in the third year of a five-year contract..

Okay. Thank you very much..

Thank you. We have no further questions at this time. I would now like to turn the floor back over to Mr. Slifka for closing comments..

Thank you for joining us this morning. We look forward to keeping you updated on our progress. Have a great day, everyone..

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time..