Global Partners LP (GLP) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to the Global Partners Second 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. Tom Hollister; 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 in any such forward-looking statements. Such factors include, but are not limited, to those described in Global Partners 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 press releases, publicly announced conference calls or other means that will 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, Edward and good morning, everyone. First, I would like to formally welcome Tom Hollister to Global. As I mentioned on our first quarter call, Tom comes to us with more than 25 years of senior financial experience.

Before joining Global in July, he served as Vice Chairman of Citizens Financial Group as well as Chairman, President, and Chief Executive Officer of the bank's private equity and venture capital business. Citizens is the US arm of Royal Bank of Scotland Group and on its own is one of the 10 largest banks in the US. Over the course of his career, he led a number of major bank integrations and we expect to leverage that M&A expertise as we execute our growth strategy. Tom, Chuck and I look forward to meeting with many of our institutional investors and analysts in the coming months.

I'll begin today's call with a review of our second quarter and a discussion of our strategy for the balance of 2006. Tom will take you through the numbers, and then we'll be happy to answer your questions.

I am extremely pleased with our second quarter financial performance. Reflecting higher commodity prices, product sales increased approximately 35%. But the real story of the quarter was the year-over-year improvement in gross profit and our outstanding bottom line performance. We posted second quarter net income of 3.5 million or $0.30 per diluted limited partner unit compared with a net loss of approximately 903,000 in the same period in 2005.

Global's outstanding financial performance was driven by our focus on higher margin product lines. While temperatures in the second quarter were warmer than normal, our results underscore the strength of our balanced approach to non-weather-dependent products, superior logistics and supply expertise.

By segment, Wholesale sales accounted for approximately 92% of our total revenue in the second quarter of 2006 while Commercial sales accounted for the remaining 8%. Wholesale volume totaled approximately 462 million gallons in Q2 '06; Commercial volume was approximately 57 million gallons. Our Wholesale volume of transportation fuels was robust in the second quarter reflecting an emphasis on higher-margin non-weather-dependent products. By example, we are also expanding our diesel fuel business to include ultra-low sulfur diesel.

Global's strong second quarter enabled us to increase our distribution for the period from April 1 through June 30, 2006, by approximately 3% to 43.75 per limited partner unit, which equals $1.75 on an annualized basis.

During the quarter, we completed the previously announced acquisition of the 109,000 barrel Bridgeport terminal, which complements our bulk terminal portfolio and creates expanded opportunities for our business in Southern Connecticut. We expect this terminal to be fully accretive on a cash distribution basis in its first year of operations. Acquisitions of terminals and marketing businesses remain an important component of our strategy. We are focused on assets that enable us to organically grow within our existing footprint or extend our core business to new geographies.

With that, I'll turn the call over to Tom Hollister for his financial review. Tom?

Thanks, Eric, and good morning everyone. It's a great pleasure for me to be working at an organization of such a rich history. Global has been a leader in New England's refined petroleum products industry for some 60 years and the Company is as dynamic as ever. I look forward to working with Eric, Ed and Charles and the entire management team to keep us on our growth trajectory.

Now, turning first to the P&L, as Eric highlighted, net income for the second quarter of 2006 was 3.5 million or $0.30 per diluted limited partner unit versus a net loss of 903,000 in the second quarter of 2005. Adjusted net income per diluted limited partner unit, a non-GAAP financial measure, also was $0.30 for the second quarter of 2006. There is no year-over-year per unit comparison since we were not a public company in the second quarter of last year. The financial tables in today's release reconcile net income per diluted limited partner unit to adjusted net income per diluted limited partner unit.

EBITDA increased more than 200% year-over-year to 6.4 million in the second quarter of 2006, while our distributable cash flow for Q2 '06 was 4.2 million. Again, I point you to our financial tables for reconciliations of GAAP net income to EBITDA, cash flow from operating activities to EBITDA, GAAP net income to distributable cash flow and cash flow from operating activities to distributable cash flow.

Sales, as Eric mentioned, increased roughly 35% from 1.03 billion in the second quarter of 2006 from 763.2 million in the year-ago quarter. Wholesale segment sales increased approximately 39% to 950.8 million from 684.2 million, while Commercial segment sales rose approximately 2% to 80.6 million in the second quarter of 2006 from 79 million a year ago.

Second quarter gross profit increased by 42% to 20.6 million in 2006, from 15.5 million in 2005. SG&A expenses increased approximately 15% to 9.4 million in the second quarter of 2006 from 8.2 million in the same period of 2005, largely reflecting professional fees and expenses associated with becoming a public company.

Operating expenses increased about 9% from 5.3 million for the three months ended June 30, 2006, from 4.8 million in the comparable period of 2005.

Our balance sheet as of June 30, 2006, reflects the seasonal contractions that are typically in our business. The key items that changed from year-end 2005 were accounts receivable and accounts payable, which were decreased by approximately 29%.

As we announced last week, we have increased the amount of our bank credit agreement by 100 million to 600 million. The increase is reflected entirely in the working capital portion of the credit facility, which is now 550 million. 35 million remains earmarked for acquisitions and the remaining 15 million can be used for general partnership purposes.

With that, we would be happy to answer any questions.

Thank you.

[OPERATOR INSTRUCTIONS]

We will take our first question from [Barrett Lasky] with RBC Capital.

Good morning, guys. Congratulations on the quarter.

Thank you.

A quick question for you. I know the revenue breakdown is 92% and 8%. Is the gross profit breakdown roughly the same between the segments?

Yes.

Yes. Should be the same?

Pretty close, yes.

Okay. And are we going to get any kind of additional clarity on the breakdown on the volumes by product or anything in the Q this time?

We are using the same disclosures that we used in the prior Q.

Okay.

Which is volume by segment. Gross profit in the Wholesale section by breakout of distillate, gasoline and residual fuel oils and no product line breakout in the Commercial pool.

Okay. Thanks, guys.

Thank you.

There are no further questions at this time.

[OPERATOR INSTRUCTIONS]

And we do, now, have a question from Ted Gardner, Raymond James.

Good morning gentlemen, great quarter. Just wondered if you guys could give us a little more color on the higher-margin product lines that you guys are focusing on? I guess, really what it boils down to is trying to get a feel for if you think this level is sustainable because we were expecting, as I believe everybody else was, sort of a negative earnings quarter and you blew us all away. So, just trying to get a feel for what things will look like, I guess, both for the third quarter as well as future second quarter type timeframes that are typically seasonally down?

Right. We won't comment on the third quarter or the future quarters. But, certainly, our business mix, as you will see, is in fact changing. We are focusing on the higher product lines. As in the past, these businesses, whether they -- whether they be term commitments with customers or in this instance, other transportation fuel type products, we are very focused on those businesses and we are growing those businesses.

Okay. And then, secondly, you mentioned the facility that was earmarked for acquisition. Is there any particular focus you guys have as far as types of terminals that you are looking for at this point or you just kind of eyes out for anything attractive at this point?

First of all, we are going to look at everything that is out there and is available. So, that's not going to change. And clearly, there are attributes and characteristics of certain facilities that fit us better than others. And those particular assets that really fit us we are going to go at very, very hard.

Okay, thanks.

[OPERATOR INSTRUCTIONS]

[Gardere & Wynne, Ryan Yellow] has our next question today.

Hi, guys. Noticed that you increased your revolving credit facility to 600 million and it seems like you have only used 183 out of that. So, maybe you could give us a little color on the kind of things that you are looking at? Apparently, from this I mean, it seemed like you are looking at a lot of things and potentially making the Company a lot bigger. And also wondering if, at one point, you would need to raise equity. Thanks.

The reason we have raised the size of the revolver was to make sure we had ample room to accommodate the growth of the business. And for that matter, any potential further spike in oil prices. We have plenty of capacity or firepower in place at this time. I should point out, of course, the 180 million is a point in time; it bounces up and down in the course of the month or quarter. And we also have letters of credit occasionally outstanding under the line in the $40 million, $50 million range.

Okay. So, you are saying that the line of credit increase from 500 to 600 is totally due to price in the commodities?

No, I would say growth. We want to make sure we have plenty of firepower or extra availability both for growth and, in today's volatile world, something could happen and the price of oil could go up a few barrels and we want to make sure we have plenty of room.

Okay. And as far as the need to issue equity, at what point, would you think in terms of equity?

We have to do a whole bunch of acquisitions in order for that to happen. And we will consult with our -- with our -- people who sort of will assist us in that and we will decide when that time is right. But, we are a little bit of a ways from there unless we have a very, very significant acquisition.

Okay, thank you.

And there are no further questions at this time. I would like to turn the call back over to you Mr. Eric Slifka for any additional or closing remarks.

Thank you for joining us this morning and we look forward to continuing to update you on our progress. Thank you very much. Have a great day guys.

Once again, thank you all very much for joining us. That does conclude today's presentation. Have a great day.