Good day, everyone, and welcome to Global Partners Fourth Quarter 2019 Financial Results Conference Call. Today’s call is being recorded. There will be an opportunity for question at the end of the call. [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. I will now turn the call over to Mr. Faneuil. Please go ahead, sir..

Thank you. 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, including gasoline and gasoline blend stocks 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, Edward. Good morning, everyone, and thank you for joining us. We delivered strong results in 2019, exceeding our full-year EBITDA guidance. Product margin in our Gasoline Distribution and Station Operations segment increased more than $23 million for the year, attributable primarily to the acquisitions of Champlain and Cheshire Oil.

In the fourth quarter of 2019, our results were negatively impacted by less favorable market conditions in our Wholesale segment. Our GDSO segment continued to perform well in that quarter, recognizing that we did not see the exceptionally strong fuel margins that benefited this segment in the fourth quarter of 2018. Turning to our distribution.

In January, our Board raised a quarterly distribution on our common units from $0.52 to $0.5250 per unit or $2.10 on an annualized basis. The distribution was paid on February 14th to common unit holders of record as February 10th.

Our integrated portfolio of terminals and retail assets together with our wholesale and commercial supply infrastructure continue to position us well going forward. Before concluding, let me briefly touch on a topic that's on everyone's mind, the coronavirus. To-date, we have not seen any impact of the virus on our operations.

That said, we are monitoring the situation closely and taking measures to ensure the health and safety of our employees and customers. Now, with that, I'll turn the call over to Daphne for her financial review.

Daphne?.

Thank you, Eric, and good morning, everyone. Our Q4 2019 results were consistent with our expectations, particularly in the context of a very strong Q4 of 2018.

Compared with the fourth quarter of 2019, the fourth quarter of 2018 saw significantly higher fuel margins in our GDSO segment, as well as more favorable market conditions across the Wholesale segment. Adjusted EBITDA for the fourth quarter of 2019 was $46.2 million, compared with $109.8 million for the same period of 2018.

For the full year, 2019 adjusted EBITDA was $233.7 million, compared with adjusted EBITDA of $310.6 million for full year 2018.

As we go through the results, please keep in mind that EBITDA, adjusted EBITDA, net income and EPS for full year 2019 include a $13.1 million loss on the early extinguishment of debt related to our repurchase of the 6.25% senior notes.

For full year 2018, these metrics include a one-time gain of approximately $52.6 million, resulting from the extinguishment of a contingent liability related to the Ethanol Excise Tax Credit.

For the fourth quarter of '19, we reported a net loss attributable to the Partnership of $0.8 million versus net income of $52.5 million for the same period a year earlier. For full year 2019, net income was $35.9 million versus $103.9 million for 2018.

DCF in the fourth quarter of 2019 was $9.4 million, compared with $67.6 million in the prior year period. DCF for the full year was $95.7 million, compared with $173.7 million in 2018. TTM distribution coverage at the end of the fourth quarter was 1.3 times. After factoring in distributions to the preferred unit holders that coverage was 1.2 times.

Turning to our segment detail. GDSO product margin in Q4 ‘19 was $147.1 million compared with $188.5 million in Q4 ‘18. The gasoline distribution contribution to product margins decreased $43.2 million in the quarter to $91.6 million.

Keep in mind that the fourth quarter of 2018 was a record quarter for GDSO, benefiting from expanded fuel margins, primarily due to an $0.80 per gallon decrease in wholesale gasoline prices from October 1st to December 31st, 2018. The average fuel margin per gallon declined $0.10 to $0.225 in Q4 ‘19 from $0.325 in the fourth quarter of ‘18.

For the full year, GDSO product market increased $23.2 million to $599.6 million in 2019 due primarily to contributions from the July 2018 acquisitions of Champlain Oil and Cheshire Oil.

The gasoline distribution contribution to product margin was $374.6 million in 2019, up $1.2 million from the prior year due to a full year of performance from those acquisitions, partially offset by a small decrease in average fuel margin per gallon.

Station Operations product margin, which includes convenience store sales, sundries and rental income increased $1.8 million to $55.5 million in the fourth quarter of 2019 due primarily to the acquisitions. For the full year, station operations product margin was up approximately $22 million to $225.1 million, also due primarily to the acquisitions.

At the end of 2019, our GDSO portfolio consisted of 1,551 sites comprised of 289 Company-operated store, 258 commissioned agents, 216 lessee dealers and 788 contract dealers. Looking at the Wholesale segment.

Fourth quarter 2019 product margin declined $33.1 million to $15.4 million from $48.5 million in the prior year period, reflecting several factors.

Less favorable market conditions in gasoline and gasoline blendstocks contributed to a $14.9 million product margin decrease, which came in at $7.4 million in the fourth four of 2019 compared with $22.3 million a year earlier. Product margin from crude oil was negative $3 million in the fourth quarter compared with positive $4.3 million in Q4 ‘18.

While expenses related to pipeline commitments were approximately $3.5 million in both quarters. In Q4 2018, we utilized our crude oil storage assets to take advantage of Contango opportunities. Those opportunities were not present in the fourth quarter of 2019.

Product margins from other oils and related products was $11 million compared with $21.9 million in Q4 2018, reflecting less favorable market conditions, primarily distillates. For the full year, Wholesale segment product margin was $122.5 million compared with $137.3 million in 2018, primarily due to lower crude oil product margin.

The decrease in crude oil product margin was primarily due to the mid-2018 expiration of a take-or-pay contract with one particular customer. As a result of the expiration of that contract, $21.6 million in revenue, recognized in 2018, was not recognized in 2019.

Crude oil product margin was negative $13 million for the full year versus positive $7.2 million in 2018 due to the expiration of that take-or-pay contract. Expense related to pipeline commitment were approximately $14 million in each year.

Gasoline and gasoline blendstocks product margin increased $7.2 million to $84 million for full year 2019, primarily due to more favorable market conditions in gasoline offset by less favorable market conditions in gasoline blendstock, primarily ethanol.

Product margins from other oils and related products was $51.6 million in full year 2019 compared with $53.4 million in 2018. Our product margin in distillates for 2019 was negatively impacted due to less favorable market conditions, largely in the fourth quarter and to weather that was both warmer than normal and warmer than in 2018.

Turning to our Commercial segment. Product margin increased $3.2 million to $10.3 million in the fourth quarter of 2019, due primarily to contributions from our bunkering business. For full year, Commercial segment product margin was up $4.9 million to $28.5 million, also primarily due to favorable market conditions in bunkering. Turning to expenses.

Operating expenses decreased $1.9 million to $85.2 million in the fourth quarter, primarily reflecting lower spending at our terminals. For the full year, expenses were up $21.3 million to $342.4 million, primarily reflecting the Champlain and Cheshire acquisitions.

SG&A expenses decreased $6 million to $43.5 million in the fourth quarter, primarily due to a decrease in discretionary incentive compensation. On a full year basis, SG&A remained flat at $171 million with decreases in both incentive comp and acquisition costs. Offset in part by increases in wages and benefits attributed in part to our GDSO business.

Interest expense was $21.7 million in Q4 2019, compared with $23.5 million in the year earlier period, primarily due to lower average balances on a credit facility, as well as lower rates. For full year 2019, interest expense was $89.9 million, up about $0.7 million from the prior year.

CapEx in the fourth quarter was approximately $30.4 million consisting of $16.6 million of maintenance, and $13.8 million of expansion CapEx, mostly related to our gas station and convenience store business. For full year ‘19, maintenance CapEx was $49.9 million, in line with our guidance of $45 million to $55 million.

Expansion CapEx was $33 million for full year, slightly below full year guidance of $35 million to $45 million. Turning to our balance sheet. Leverage, which is defined in our credit agreement as funded debt to EBITDA, was approximately 3.8 times at the end of the fourth quarter.

We continue to have ample excess capacity under our $1.3 billion credit facility. As of December 31, we had total borrowings outstanding of $516.6 million, including $192.7 million under $450 million revolving credit facility and $323.9 million under our $850 million working capital facility.

The reduction in a revolver from $220 million at year end 2018 was due in part to proceeds from the sale of assets and the larger bond offerings. Turning to guidance. For full year 2020, we expect EBITDA in the range of $205 million to $230 million.

This guidance excludes any gains or losses on the sale and disposition of assets, and goodwill and long-lived asset impairment charges. With that, Eric and I would be happy to take your questions.

Operator?.

[Operator Instructions] Our first question is from David Schechter with Perspective Capital Management. Please proceed. .

Good morning and congratulations on beating the high end of guidance.

I have one question, which is at the low end of the current guidance, what would be the coverage ratio on the dividend as it is today at $0.53?.

Good morning, David. I haven't done that calculation.

You're talking about 205, and what was the coverage base?.

Yes, assuming all else being equal..

I don't have that. .

Okay. And, at the high end of guidance, it would be equivalent to what we did this year, and the coverage ratio was, was very, very good. But the difference -- $25 million might make a difference on the coverage ratio..

Yes. That’s totally fair..

Okay. All right, great. Thanks very much..

[Operator Instructions] We have reached the end of our question-and-answer session. I would like to turn the conference back over to Mr. Slifka for closing remarks..

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

Thank you. This concludes today's conference. You may disconnect your lines at this time and have a wonderful day..