Global Partners LP (GLP) 2006 Q1 法說會逐字稿

Good day, everyone and welcome to the Global Partners first quarter 2006 financial results conference call. Today's call is being recorded. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Executive Vice President and Chief Financial Officer, Mr. Thomas McManmon; Senior 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. Edward Faneuil for opening remarks. Please go ahead, sir.

Good morning, everyone. Thank you for joining us. Before we begin, let me remind everyone that during today's call we will make forward looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements may include, but are not limited to, projections, beliefs, and estimates concerning future financial and operational performance of Global Partners. The future performance and financial results of the partnership may differ materially from those expressed or implied any such forward looking statement. Such factors include, but are not limited to, those described in Global Partners filings with the Securities and Exchange Commission.

Global Partner undertakes no obligation to revise or publicly release the results of any revisions to the forward looking statements that may be made during today's conference call. With regulation FD in affect, it is our policy that any material comments concerning future results of operations will be communicated through press releases, publicly announced conference calls or other means that would constitute public disclosure for purposes of regulation FD. Now, let me turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thanks Ed and good morning, everyone. I'll begin today's call with a review of our first quarter and a discussion of our strategy going forward. Tom McManmon, our CFO, will take you through the numbers, then we'll be happy to answer your questions.

Global had an outstanding first quarter in which we continued to generate strong, diversified cash flows. We delivered a 13% increase in gross profit and a 12% increase in net income for the first quarter of '06 compared with the same period in '05. Due to higher commodity prices, sales increased about 17% from 1.15 billion for the first quarter in '05 to 1.35 billion for the first quarter in '06. We increased net income by focusing on higher margin products in both the wholesale and commercial segments of our business. Non [inaudible] sensitive products anchored by transportation fuels endured a strong quarter. The successful execution of these strategies offset the affects of an exceedingly warm first quarter of '06, including a January that was 20% warmer than normal.

The wholesale segment, which includes desolates, unbranded gasoline and residual oils, to wholesale distributors, retailers of home heating oil and unbranded resellers of gasoline, accounted for about 89% of our total revenue in Q1 '06. Commercial sales, which includes sales of home heating oil, diesel, kerosene, unbranded gasoline and residual oil to large commercial and industrial customers, as well as to the public sector, accounted for approximately 11% of our revenue in Q1 '06. Wholesale volume totaled 688.5 million gallons in Q1 '06; commercial volume was 109.5 million gallons.

In April, our Board of Directors approved a quarterly cash distribution of $0.425 cents per unit for the first quarter of '06 or $1.70 on an annualized basis. This distribution will be paid May 15th to common and subordinated unit holders as of the close of business May 4th. This week we successfully completed the acquisition of 109,000 barrel refined petroleum products terminal in Bridgeport, Connecticut. The Bridgeport acquisition provides Global with a key location in Southern Connecticut and compliments our existing portfolio of bulk terminals. It also strengthens our lead ship position in the New England market place. We fully expect this acquisition to be accretive to Global Partners unit holders on a cash available for distribution basis. Going forward we will continue to target acquisitions of strategic asset and marketing businesses both within our existing area of operations and in locations that expand our geographic footprint.

Before Tom takes you through the numbers, I want to talk briefly about the executive management change we announced this morning. While Tom will be transitioning from the CFO position effective July 1st, I'm delighted that he plans to continue in a senior advisory role to the executive management team. His career at Global spans almost 30 years during which he has made extraordinary contributions to the company. From managing key relationships with lenders to helping to oversee our initial public offering last year, Tom's involvement has enhanced Global's growth and success. I will continue to value his industry knowledge and I look forward to his continued counsel.

Succeeding Tom McManmon as CFO is Tom Hollister, a former Vice Chairman of Citizen's Financial Group and a former Chairman, President and Chief Executive Officer of his [private equity adventure capital [resident Citizen's Capital]. He brings to Global more than 25 years of financial experience that includes his strong background in the energy business. And as President and CEO of Citizen's Bank of Massachusetts he built the bank from 6 billion to 28 billion in assets. He also ran the energy and utilities business for Bank of Boston overseeing 3 billion in commitments. Tom has served as project leader on eight bank integrations including acquisitions of Bay Banks, UST Corp, State Street Corp Commercial Banking Division and Citizen's 10.5 billion acquisition of Charter One Financial.

In short, Tom is an exceptional choice to become our next CFO. With that I will turn the call over to Tom McManmon for his financial review. Tom?

Thanks Eric. Before I talk about our financial performance, I want to thank Eric for his kind words. I've thoroughly enjoyed my relationship with the Slifka family and Global during the past three decades. I have also personally known Tom Hollister for more than 20 years and I can't think of a better person to succeed me as CFO. I look forward to continuing to contribute to the overall success of Global Partners and continuing my relationship with the Slifka family.

Turning first to the P&L, net income increased approximately 12% from $11.3 million in the first quarter of '05 to $12.7 million or $0.85 per diluted limited partner unit in the first quarter of '06. As reflected in the financial tables included in this morning's news release, adjusted net income per diluted limited partner unit a non-GAAP financial measure was $1.10 for the first quarter of 2006. There is no per unit comparison since we were not a public company in the first quarter of last year.

EBITDA increased approximately 16% from $14.4 million in the first quarter of '05 to $16.8 million in the first quarter of '06. Please note that the financial tables in this morning's news release include reconciliations of net income to adjusted net income. net income to EBITDA and cash flow for the operating activities to EBITDA for the three months ended March 31, 2006 and 2005. We also provide a reconciliation of net income through distributable cash flow, which was $12.9 million in the first quarter of '06.

Sales increased roughly 17% from $1.15 billion in the first quarter of '05 to $1.35 billion in the first quarter of '06. The increase reflects higher commodity prices and our transition to higher margin products.

By segment, wholesale sales increased approximately 17% from [$1.03 billion in the first quarter of '05 to $1.2 billion] for the same period in '06. Commercial segment sales for the first quarter rose approximately 23% from $125 million in the first quarter of '05 to $154 million in the first quarter of '06.

Gross profit for the first quarter increased 13% to $28.4 million in '05 to $32.2 million in '06. SG&A expenses increased approximately 10% in the first quarter of '05 and to the first quarter of '06, largely reflecting professional fees and expenses. Associated with being a public company and expenses associated with our Sarbanes Oxley compliance initiative.

Operating expenses increased about 10% for the three months ended March 31, '05, compared with the same period in '06, primarily as a result of pipeline repairs at our Chelsea terminal and increased energy costs associated with product handling at our terminals.

First quarter interest expense rose 15% from $2 million in '05 to $2.3 million in'06, reflecting a rise in the market price for product and the resulting increased cost of carrying inventories and accounts receivable.

Our balance sheet as of March 31, '06 reflects the seasonal contractions that we normally see in our business. The key items that changed from year-end '05 were accounts receivable, which declined about 24%; inventories, which decreased approximately 42%; accounts payable, which declined 49%; and the usage on our revolving line of credit, which decreased by 28%.

With that, we would be very happy to entertain questions.

[OPERATOR INSTRUCTIONS]

Your first question is from the line of [Ted Gardner] with Raymond James.

Good morning, gentlemen.

Good morning, Ted.

On the P&L statement that you guys have and also in the tables you have depreciation and amortization broken out on the tables at 1.72 million which is about on the P&L you only had 406 on the amortization line. I was just wondering if the other 666,000 just in the operating line or is that broken out elsewhere?

It goes into two sections. This is Chuck Rudinsky. Its part of the depreciation is re-classed ore included in cost of good sold and that is depreciation on our terminals. The remaining depreciation is in SG&A. We break it out on the cash flow and the EBITDA reconciliations in total.

Okay and do you have the amounts for each of those off hand?

I don't have it with me, but I can get it for you.

Okay. That'd be great.

That was a SEC requirement.

Okay. All right, that's all I had. Thanks.

[OPERATOR INSTRUCTIONS] Sir, there are no questions at this time.

Great. With that, thank you all for joining us this morning and we look forward to continuing to update you on our progress. Thank you everyone.