Eric Slifka - President and Chief Executive Officer Daphne Foster - Chief Financial Officer Mark Romaine - Chief Operating Officer Edward Faneuil - Executive Vice President and General Counsel.

Ben Brownlow - Raymond James Tim Howard - Stifel Will Hardy - RBC Capital Markets Mike Gyure - Janney Ned Baramov - Wells Fargo Lin Shen - HITE Hedge James Jampel - HITE Hedge.

Good day, everyone. And welcome to the Global Partners' Second 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. At this time, all participants are in a listen only mode [Operator Instructions].

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; and Executive Vice President and General Counsel, Mr. Edward Faneuil. At this time, I would like to turn the call over to Mr. Faneuil for opening remarks. Please go ahead, sir..

Good morning, everyone. Thank you for joining us today. 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’ EBITDA guidance and future performance are based on assumptions regarding market conditions, such as the crude oil market, business cycles, demand for petroleum products and renewable fuels, utilizations of assets and facilities, weather, credit markets, the regulatory and permitting environment and the forward product pricing curve, which could influence quarterly financial results.

We believe these assumptions are reasonable given currently available information and our assessment of historical trends. Because our assumptions and future performance are subject to a wide range of business risks and uncertainties, we can provide no assurance that actual performance will fall within guidance ranges.

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 the purposes of Regulation FD.

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

Thank you, Eddie. Good morning, everyone and thank you for joining us. We completed the first half of 2018 with a solid second quarter. We continue to execute on our strategy to expand our retail gasoline business with the July acquisitions of Champlain and Cheshire, which added 136 sites, including 62 owned properties.

The location of these stations in Vermont and New Hampshire allow us to leverage our terminal assets in Albany, New York and Burlington, Vermont, and drive economies of scale.

The Champlain acquisition added 126 stations, including 37 Company-operated sites, consisting of both fuel and Jiffy Mart-branded convenience stores; 24 owned or leased fuel sites and fuel supply agreements for approximately 65 gas stations. The location is primarily market major fuel brands such as Mobil, Shell, Citgo, Sonoco and Irving.

The Cheshire acquisition included 10 Company-operated sites with fuel and T-Bird branded convenience marts. The deal pipeline within the retail gas stations convenience store market continues to be very active, and we are always evaluating opportunities to expand our portfolio.

Last month, the Board increased our quarterly cash distribution to 47.50 per unit or $1.90 on an annualized basis. The distribution will be paid August 14th to unit holders of record as of the close of business today, August 9th.

In summary, through organic investments and strategic M&A, we’re leveraging our expertise in acquiring, integrating and operating assets. We begin the second half of 2018 well positioned financially and operationally to expand our asset base and continue to execute on our growth objectives.

With that, let me turn the call over to Daphne for her financial review.

Daphne?.

Thank you, Eric and good morning everyone. Let me begin this morning by discussing our recently completed 9.75% Series A preferred unit offering. We are pleased with this capital raise, which positions us to continue to take advantage of acquisitions and organic expansion investment opportunities.

A total of 2.76 million units were sold at $25 per unit, generating approximately $66.8 million in net proceed, which we use to reduce indebtedness under our credit agreement. Distributions on the units will be payable quarterly at a fixed rate of 9.75% per annum.

On and after August 15, 2023, distributions on the units will accumulate for each distribution period at an annual floating rate equal to the three months LIBOR for the spread of 6.774%.

Turning to our results gross profit in the second quarter increased $13.9 million to $149.3 million, primarily driven by favorable market conditions in wholesale gasoline and contributions from the Honey Farm sites within our GDSO segment. Combined product margins increased $12.1 million to $169.9 million.

Operating expenses increased $5 million to $76.2 million in the quarter, primarily reflecting the addition of 33 Honey Farm sites with associated headcount add, as well as real estate, taxes, rent, utilities and maintenance expenses. In addition credit card fees increased year-over-year due to higher gasoline prices.

SG&A expenses in Q2 increased $5.3 million to $40 million, reflecting into increased marketing and promotional expenses, as well as salaries and benefits to support our GDSO business. Professional fees and depreciation also increased year-over-year.

Interest expense was $21.6 million in Q2 2018 compared with $21.9 million in the year earlier period due primarily to the write off of a portion of our deferred financing fees in the second quarter of 2017 associated with an amendment related to refinancing of our credit agreement, partially offset by an increase in interest rates.

Net income more than doubled in the second quarter to $6.4 million from $2.4 million last year. EBITDA was $53.1 million, $1.8 million higher than the same period in ’17. DCF was $21 million compared with $21.8 million in the same period in 2017.

These results included $3 million and $2.4 million net loss on sale and disposition of assets in the second quarter of 2018 and 2017 respectively. Adjusted EBITDA therefore was $56.1 million compared with $53.7 million in the same quarter last year, up $2.4 million. Turning to our segment details.

GDSO product margin in 2Q ‘18 increased $3.1 million to $125.6 million. The gasoline distribution contribution to product margin was down $2.4 million to $76.9 million in the second quarter 2018, primarily due to lower fuel margins, partially offset by increase in product margins due to the Honey Farms acquisition.

The average fuel margin in the quarter was negatively impacted by rising wholesale gasoline prices during the first two months of the quarter, and was $0.185 per gallon compared with $0.195 per gallon in last year’s second quarter.

Station operations product margin, which includes convenient store sales, sale of sundries and rental income increased $5.5 million to $48.7 million, largely due to Honey Farms. At quarter end, our GDSO portfolio consisted of 256 Company-operated stores, 264 commission agents, 226 lessee dealers and 699 contract dealers for a total of 14.45.

With the acquisitions of Champlain and Cheshire Oil in July, our total site count increases to approximately 15.80 with about 300 Company-operated sites. In our wholesale segment, the gasoline and gasoline blend stock product margin increased $4.8 million to $23.4 million, primarily due to more favorable market condition in gasoline.

Product margins from crude oil increased $0.6 million to $5.4 million due in part to lower railcar lease expense and lower terminal lease expense associated with the expiration of a terminal lease in 4Q 17, partially offset by a decline in volume sold as crude by rail differentials continue to be challenged.

Product margin from other oil and related products was up $1.8 million to $9.6 million due in part to improved margins in residual oil. In our commercial segment, product margin increased $1.7 million to $5.8 million, primarily due to an increase in bunkering activity. Total volume increased by about 162 million gallons to 1.3 billion gallons.

Volume in our wholesale, commercial and GDSO segment increased approximately 128 million gallons, 25 million gallons and 10 million gallons respectively. CapEx in the second quarter was approximately $17.6 million, consisting of 11.2 million of maintenance CapEx, including 9.1 million related to our retail sites.

Expansion CapEx was $6.4 million in Q2, which related primarily to our retail gas station and convenience stores. For full year 2018, we continue to expect maintenance CapEx in the range of [Technical Difficulty] and expansion CapEx in the range of $30 million to $40 million. Turning to our balance sheet.

As of June 30, we had total borrowings outstanding of $483 million into our $1.3 billion facility. Borrowings consisted of $185 million under our $450 million revolving credit facility and $298 million under our $850 million working capital facility.

Leverage as defined in our credit agreement as funded debt to EBITDA was approximately 4.1 times at the end of the second quarter.

Since the end of 2Q, we’ve raised preferred equity receiving net proceeds of approximately $66.8 million, and we have closed on the acquisitions of Champlain Oil and Cheshire Oil for approximately $134 million and $32 million respectively, excluding inventory. As we have said in the past, we target long term leverage at 4 times or better.

We raised the distribution for the quarter ending June 30 to $1.90 annually and we continue to have strong coverage. TTM coverage at the end of 2Q was 2.2 times. Turning to guidance. We have revised our full year 2018 EBITDA guidance to a range of $190 million to $215 million compared with the prior range of $180 million to $210 million.

This guidance excludes any gain or loss on sale and disposition of assets, and any goodwill and long lived asset impairment charges.

As a reminder, 2018 EBITDA guidance excludes the one-time $52.6 million gain recognized in the first quarter as a result of the extinguishment of the contingent liability related to the volumetric ethanol excise tax credit.

Before we go to Q&A, I wanted to let you know that we will be participating in one-on-one meetings, August 15th or 16th at the Citi 2018 One-on-One MLP Midstream Infrastructure Conference. With that, Eric and I will be happy to take your questions.

Operator?.

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

Congratulations on the quarter and the acquisitions. On the 136 distribution outlets that were acquired.

Can you talk about or give some color around what the expected volume contribution would be and the fuel margin or cents per gallon impact?.

I would say on company operated stations margins in this market generally range in the $0.20 plus per gallon area all the way up to $0.30 depending on the specific markets that you’re in and products that you’re selling, so I’d say it’s pretty much down the fairway with how company operating sites that have traditionally operated.

What was the other question that you had as well, Ben?.

The total volume contribution of the 136 outlets that were -- or fuel distribution outlets that were acquired?.

We have approximately $100 million..

And just a little bit more color on this, so there’s 47 acquired Company-operated locations in that $0.20 to $0.30 per gallon range.

Is the merchandise sale on an common average basis across that similar to the same?.

I would say broadly the stores there are a little bit bigger, a little bit more complicated, because they are just little bit size larger than the total chain that we have today. So the sales, even though there is large population there, are higher on average in those sites and the employee counts higher there too to manage the size of this….

And just one more for me and I'll jump back in the queue, the distribution increase, obviously, well respected by the market. How should we think about just -- and you guys have talked about this but just previously, but to revisit it just give us an update. What your thought is on the long-term approach to that distribution policy.

Are you targeting steady annual growth rate that depend on the coverage ratio, just should we think about that?.

I’d say the Board looks at all of those factors, and so they all get taken into account and it frankly depends what’s happening in the company. We’re going to continue to look for deals and look for transactions and that weigh in as well..

Our next question comes from the line of Tim Howard with Stifel. Please proceed with your question..

Will you provide cash flow expectations when invested multiple for the two recently completed acquisitions?.

So the way we think about acquisitions, and I think we’ve historically stated is. We look at these deals. We try to get somewhere in the mid to upper teens for our returns with a hope that if things break right for us, we can even do a little bit better than that. But I’d just say broadly that’s we look at and target for returns..

And do these particular deals have any synergies to pull out or different from your historical -- do you expect the upper end of that or can you provide any insight to do these two….

So specifically I would say on these sites, they happen to be around terminal assets that we have and that are good facilities.

Overtime, the hope would be we can figure out a way to; A, lower our cost of acquisition of product that goes through the facilities controlling the particular; and then also drive that business through the terminal assets that surround the facilities. So we’re talking specifically of Burlington and Albany..

Our next question comes from the line of Will Hardy with RBC. Please proceed with your question..

Nice to see the dividend increase, we thank you. One question I have is, what are the splits again between the GP and the LP? It’s been a long time and I don’t remember what they are..

They are just in -- in a little over 1.85 and 1.90 that just into the split and its south of 2%..

I will send you an email later Daphne and if you don’t mind sending me that spread, I’d like to have it. Thank you..

The expectation is that Q we filed later today and then it will also be clear in the Q. .

Our next question comes from the line of Mike Gyure with Janney. Please proceed with your question..

Can you guys maybe talk a little bit about what’s going on with the rail transloading assets, and I guess if anything and how [Technical Difficulty] portfolio over the long term?.

As we’ve talked about before, those rails transloading assets in North Dakota have been idled for some time. There is minimal activity going on over the last few years there. We have utilized some of the storage that we have either for our own benefit or third parties, so we’re looking for any opportunity to run some business through there.

I will say that there’s -- while there’s not a lot of activity going on there that that market is certainly picking back up. And so we’re just in the process of trying to exploring any opportunity with -- predominantly with third parties to utilize those facilities, but we have nothing concrete to speak up at the moment..

[Operator Instructions] Our next question comes from the line of Ned Baramov with Wells Fargo. Please proceed with your question..

Most of my questions were answered. I just had a quick one on leverage. I guess, you came in at 4.1 at the end of the second quarter.

Could you maybe talk about pro forma the two transactions in the preferred offering, where do you expect leverage to be in at the end of the third quarter and maybe at year-end?.

So with the $67 million or so in terms of net proceeds that also really equates to about 40% of the rate in terms of the 166 that we spent on Cheshire and Champlain.

And we’ll continue to when we have asset sales in terms of the non-strategic assets that we continue to turn through, we’ll continue to fly back with a view there continuing having a long term leverage cap of about 4 times or better..

Our next question comes from the line of Lin Shen with HITE Hedge. Please proceed with your question..

I have two questions, I think, also James Jampel is on the line maybe he has couple of questions. First, the wholesale volume is up over 20% year-over-year.

Can you talk a little bit of color on what reasons?.

Lin, that’s really got to do related to our gasoline supply business. So we have taken some additional storage in New York Harbor to run that supply and logistics businesses, and it’s given us the opportunity to access different parts of the market.

So we in addition to utilizing that storage for the benefit of our requirement in our system, we've also been able to take advantage of some third party sales through that book as well. So it’s really -- that’s the real driver of it..

So should we think about this run rate for the wholesale volume?.

I wouldn’t focus on the volume so much, because that is a very low margin business and it’s also very opportunistic. So I think you’re going to -- you’ll likely to see -- and the activity will be driven by opportunity that we see, it’s not necessarily something we have to be engaged in. So I think it’d be hard to use that as a going forward number..

And also what should we think about the run rate for SG&A also OpEx pro forma acquisitions?.

So certainly when you look at OpEx, it’s pretty much in line first quarter second quarter. Obviously, there is some noise in terms of timing of maintenance and then credit card fees obviously have an impact.

But certainly as we take on OpEx would be where all the new Company-operated site employees would go and then you’ve got additional utilities and maintenance and what not. So can’t use a number on that but you’ll certainly see an uptake in OpEx related to the acquisition.

So therefore over and above where we’re running at today, which was $76 million in 2Q. SG&A less of an impact certainly from those acquisitions, those are basically employees that we take that in call above site, so would be much of a modest impact in our current run rate..

Great, thank you. Also James I think have questions also..

Looking at the increased EBITDA guidance, it would seem like given the acquisitions you made and given what you did in the second quarter and then maybe EBITDA guidance could be a little higher, even higher than what you put down in the press release.

It’s a little puzzlingly low I guess in our view?.

So we were at 180 to 210 and 190 to 215, and looking at where we are year-to-date, which we completed a solid quarter and looking forward to the acquisitions, feel comfortable with 190 to 215. And certainly that also reflect any one-time transaction costs that we have related to the acquisitions..

And then I’ve got a question about financing. I’m not sure I’ve ever seen what you guys just did. I’d have to rack my brain in terms of raising the distribution and at the same time going on and getting preferred. So there are both ways of -- in the case of the proffered raising capital and in the case of the distribution giving capital back right.

So you did both at the same time. And I was wondering how did you think about the financing, the preferred financing vis-à-vis just coming for straight equity given where your stock price is now is much better than it was just a couple of weeks ago.

And just in general what do you think you saved by using the preferred route as opposed to using the common equity route?.

Well, I would say in terms of the preferred and certainly a handful of MLPs have access to preferred market over the past year or two. I think we view it as a very attractive source of capital and this fixed rate for the next five year. And we would have the option to take it out at par in five years.

So we view that as a very attractive source of equity capital..

Was there some analysis that the bankers did and looking at okay, you could use preferred here or you could raise common.

And going to the math and saying, given where we think e can price both, the preferred is better? Or did you just like -- just decide to go prefer without looking at the common?.

We look at all options certainly. We assess all financing options. I would say in general, f you look at the number of equity issuances on the common units today and the MPL market that has been issued year-to-date a pretty small number of companies that have passed that market..

And it was at the market considered at all?.

At the market is something that you would bleed in overtime relative to our average daily trading volume. So that would be a slow add over time, we have not accessed the ATM to-date..

The reason I am belaboring this point is that among MLP’s, you guys are among the least liquid in terms of shares turning over.

And so we thought wow, if you could actually get it out to the common market without it being more expensive than the preferred that that would be the way to go, because now you have -- the common units is still the same and now you have this preferred equity, which is hardly going to trade at all either, so – but -- well, thank you very much..

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

Thanks for joining us this morning. We look forward to meeting with you at the upcoming conference and keeping you updated on our progress. Everybody have a great day. Thank you..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day..