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Edited Transcript of GLP earnings conference call or presentation 9-Mar-17 3:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Global Partners LP Earnings Call

WALTHAM Mar 9, 2017 (Thomson StreetEvents) -- Edited Transcript of Global Partners LP earnings conference call or presentation Thursday, March 9, 2017 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Edward Faneuil

Global Partners LP - EVP, General Counsel and Secretary

* Eric Slifka

Global Partners LP - President and CEO

* Daphne Foster

Global Partners LP - CFO

* Mark Romaine

Global Partners LP - COO

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Conference Call Participants

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* Barrett Blaschke

MUFG Securities - Analyst

* Ben Brownlow

Raymond James & Associates, Inc. - Analyst

* Gabe Moreen

BofA Merrill Lynch - Analyst

* Lin Shen

HITE Hedge Asset Management - Analyst

* James Jampel

HITE Hedge Asset Management - Analyst

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Presentation

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Operator [1]

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Good day, everyone, and welcome to the Global Partners fourth-quarter 2016 financial results conference call. Today's call is being recorded. (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; Executive Vice President and Chief Accounting Officer, Mr. Charles Rudinsky; and Executive Price 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.

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Edward Faneuil, Global Partners LP - EVP, General Counsel and Secretary [2]

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Good morning. 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, renewable fuels and logistics, 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 purposes of Regulation FD.

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

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Eric Slifka, Global Partners LP - President and CEO [3]

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Thank you, Edward. Good morning, everyone, and thank you for joining us. During 2016, we successfully positioned Global for growth and profitability by executing on the strategic actions outlined for you on our Q4 call a year ago. You may remember we specifically identified high fixed costs brought on by underutilized railcars in our crude oil business. As discussed on that call, our goals were to ensure a sound balance sheet with ample liquidity, and generate sufficient cash flow to cover distributions and capital expenditures without relying on outside sources of capital.

To achieve these goals, or 2016 plan included cutting expenses, accelerating an asset sale program across our portfolio concentrated on non-strategic assets, and at the same time focusing efforts on businesses that provide the highest returns. Our successful execution of this plan in 2016, and continuing in 2017, has provided Global with increased flexibility to invest in assets that are fundamental to growth objectives for our retail, wholesale, and commercial lines of business.

Let me review some of our accomplishments in 2016. We completed the sale and leaseback of 30 gasoline stations and convenience stores, enabling us to unlock the value of this fee-owned real estate. We sold 30 non-strategic gasoline stations and convenience stores to Mirabito Holdings, a transaction in which we also executed long-term supply contracts for petroleum products.

In addition, we made significant progress during the year in selling non-strategic retail sites in the Northeast and mid-Atlantic. Through the end of 2016, approximately 70% of those NRC-listed sites have been sold or are under agreement. In total, the sale-leaseback, the Mirabito transaction, and the disposition of sites in 2016, generated approximately $136 million in gross proceeds to Global.

In addition to the divestiture of non-strategic locations, we also have added high-return assets to our retail deck, where we saw the opportunity to leverage our scale and experience in fuel distribution and C store merchandising. In April, we expanded our retail network in Western Massachusetts, signing a long-term lease agreement for 22 gas stations and C stores.

In December, we signed an agreement to voluntarily terminate a sublease for 1,610 railcars from a third party. As part of that agreement, we made a one-time discounted lease termination payment. The key takeaway of that agreement is that the termination of the lease, three years ahead of its scheduled expiration, saving the Partnership $10.2 million in cash, and putting a significant portion of the expenses associated with the underutilized railcars behind us.

We continually evaluate assets and seek ways to improve the performance of our business. Monetizing non-strategic assets remains an important focus for Global. Last month, we completed the sale of our natural gas marketing and electricity brokerage business for approximately $17.3 million. In February, we engaged a financial advisor to solicit proposals for the potential sale of six refined petroleum product terminals located in New England, New York, and Pennsylvania. The assets consist of terminals that represent approximately 1.1 million barrels of aggregate shell storage capacity.

The core elements of our business -- terminaling, marketing and retail -- are fundamentally strong. Looking ahead, we continue to look for opportunities to acquire additional retail and wholesale businesses, and evaluate terminal assets as they become available.

On the West Coast, we are working to finalize permits needed to expand that facility to drive additional value. In summary, our plan last year was to position Global for growth and profitability, and we executed on that plan. We solidified our balance sheet, improved our capital structure, and increased the flexibility to strategically invest in assets.

Before turning the call over to Daphne for a financial review, let me mention that in January, the Board of Directors announced a quarterly cash distribution of $0.4625 or $1.85 on an annual basis. The distribution was paid on February 14 to unitholders of record as of the close of business on February 9, 2017.

With that, let me turn the call over to Daphne. Daphne?

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Daphne Foster, Global Partners LP - CFO [4]

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Thank you, Eric, and good morning, everyone. As Eric noted, in December we signed an agreement to voluntarily terminate early a sublease with a counterparty for 1,610 railcars that were underutilized due to unfavorable market conditions in the crude by rail market.

Separately, we entered into a fleet management services agreement, effective as of January 1, 2017, with the counterparty, pursuant to which we will provide them with railcar storage, freight, cleaning, and other services.

As a result of the sublease termination we recognized a lease exit expense of $80.7 million in the fourth quarter of 2016, which consisted of $61.7 million in cash consideration and settlement of the remaining lease payments; $10.7 million of costs for railcar storage, freight, cleaning, insurance, and other services; and $8.3 million in non-cash accounting adjustments. The payment of $61.7 million represents a discount of approximately $10.2 million in railcar lease payments that Global would have been obligated to pay over the next three years.

The termination of the sublease eliminates future lease payments related to these railcars of approximately $30 million, $29 million, and $13 million in 2017, 2018 and 2019, respectively.

In connection with the sublease termination, we executed an amendment to our credit agreement that permitted the use of borrowing to make the early termination payments. The amendment also accelerates the step down in the combined total leverage ratio from 5.5 to 5 times, effective with the quarter ended December 31, 2016.

Now let me review our fourth-quarter and full-year 2016 results and provide our EBITDA guidance for 2017. Combined product margin in the fourth quarter increased $18.5 million or 12% year-over-year to $175.9 million. The increase was driven by strong performance across the wholesale segment and growth in our commercial segment, which was up 64%, due primarily to colder weather.

Rising wholesale gasoline prices, as well as the sale of sites, contributed to a $9.6 million product margin decline in the GDSO segment. The combination of growth in the wholesale and commercial segments more than offset the decline in the GDSO segment.

Total expenses decreased $1.9 million year over year, excluding the loss in asset sales and disposition of assets and the lease termination expense.

SG&A expenses in Q4 increased approximately $1 million to $41.3 million. Operating expenses decreased $2.3 million or 3% to $69.8 million, largely due to declines at our North Dakota and Oregon facilities, reflecting lower volume and reduced staff. The decrease was partially offset by higher expenses associated with our GDSO segment, including rents and various other expenses relating to the addition of leased sites.

Fourth-quarter 2016 adjusted EBITDA, when further adjusted for the lease termination expense, increased by $19.7 million to $66.3 million from the same period a year earlier, as a result of the higher combined product margins and lower expenses.

Interest expense decreased $1.1 million to $21.1 million. The decrease is primarily due to lower average balances on our revolving credit facility for the fourth quarter of 2016 compared with the same period in 2015. Those lower balances reflect use of proceeds from asset sales, including the sale-leaseback transaction to pay down debt, offset by the railcar lease termination payments. Excluding the one-time railcar lease termination expense, and net loss in sale and disposition of assets, distributable cash flow would have been $35.4 million compared with $18.1 million for the same period in 2015.

While DCF, as defined by our Partnership agreement, does not permit adjustments for certain non-cash charges, we believe that adding back these non-cash charges, as well as the lease termination expense, more accurately reflects the Partnership's cash flow from normal operations.

For the full year, excluding the lease termination expense, net loss on sale and disposition of assets and the goodwill and long-lived asset impairment, DCF would have been $93.9 million. While distribution coverage was negative on a trailing 12-month basis, distribution coverage after these adjustments would have been 1.48 times.

Let me take you through our segments in more detail, beginning with GDSO. Comparing Q4 2016 with the same period in 2015, product margin was down $9.6 million in the quarter to $111.7 million. This reduction reflects rising wholesale gasoline prices and the sale of sites, partly offset by the addition of leased sites to our portfolio. The gasoline distribution portion of the GDSO segment was down $4.7 million in the quarter to $68.9 million, and station operations product margin decreased $4.9 million to $42.8 million.

Wholesale segment product margin increased $25.1 million to $56.8 million in the fourth quarter of 2016. Crude oil product margin was $15.7 million in the quarter compared with $6.4 million in the fourth quarter of 2015, primarily due to increased revenue from accrued take-or-pay contract, which more than offset lower sales activity. The decline in activity reflects continuing tight crude differentials.

Wholesale gasoline and gasoline blendstock's product margin increased $7.9 million to $19.2 million, primarily reflecting more favorable market conditions. Other oils and related products, which include distillates and residual fuel, also benefited from favorable market conditions, including weather that was 25% colder than last year, resulting in a $7.9 million increase in product margins to $21.8 million. Commercial segment product margin increased $2.9 million or 64% to $7.4 million from the fourth quarter of 2015, primarily due to colder weather.

Total volume for the fourth quarter of 2016 was down about 31 million gallons to 1.3 billion. Increases in GDSO and commercial volume were offset by a $92 million decrease in wholesale volume, due primarily to the weak crude oil market.

CapEx in the quarter was approximately $16.5 million, including $4.4 million in expansion CapEx and $12.1 million in maintenance CapEx. Expansion CapEx consisted of approximately $3.4 million in investments in our gas station business, with much of the remaining funds used in IT-related projects. Maintenance CapEx included $10.2 million related to our retail sites.

Now let me provide you some color on our full-year 2016 performance. Product margin in our GDSO segment increased approximately $17.8 million or 4% from full-year 2015, driven primarily by a full year of Capitol Petroleum and the addition of the O'Connell and Getty and leased sites, partially offset by the sale of non-strategic sites.

Volume increased 72 million gallons to 1.6 billion, and fuel margin increased $12.6 million to $289.4 million for the same reasons. Product margin for station operations grew $5.2 million or 3% to $183.7 million, primarily due to a full year of rental income from the Capitol Petroleum site.

In contrast, wholesale segment product margin declined $63 million to $144.9 million, due primarily to tight crude differentials as Mid-Continent crude did not discount sufficiently to make rail transport to the East Coast competitive with imports.

Crude oil product margin declined $87.3 million to negative $13.1 million, which includes $45.7 million in fixed costs associated with railcar lease expenses. With the early lease termination in December, we have approximately 800 crude oil railcars remaining under our lease. We estimate the lease expense for these cars will be approximately $12 million in 2017, $6 million in 2018, and $2 million in 2019, after which the leases expire.

Product margin from gasoline and gasoline blendstocks of $83.7 million was up 27% from full-year 2015, reflecting favorable market conditions for wholesale gasoline and gasoline blendstocks, as well as higher volume through our terminals.

The margin from other oils and related products, including distillates, increased by 10% or $6.6 million to $74.3 million, due primarily to more favorable market conditions in distillates. The decline in crude oil product margin more than offset growth in other parts of our business, resulting in a $50.4 million decline in combined product margin in 2016, to $642.1 million.

SG&A expenses decreased $27.3 million or 15% to $149.7 million due to decreases of $12.9 million in professional fees and due diligence expenses, $8 million in wages and benefits, and $11.2 million in 2015 acquisition costs related to Warren and Capitol, partly offset by increases including severance charges related to the reduction in our workforce.

Operating expenses declined $1.8 million to $288.5 million, with more than $10 million in decreases across our terminal network, including lower wages and benefits, partially offset by the addition of leased sites in our GDSO segment and a full year of capital.

Interest expense, at $86.3 million, includes $11.8 million associated with the financing obligations recognized in connection with the acquisition of Capitol and the sale-leaseback transactions, and a $1.8 million write-off associated with a portion of the deferred financing fees when we reduced our credit facility in early 2016.

Adjusting for the net loss in sale and disposition of assets, non-cash impairment charges, and the lease exit and termination expense, full-year 2016 EBITDA would have been $210.4 million.

Turning to CapEx, maintenance CapEx was approximately $33 million for 2016, of which more than $25 million reflects investments in the larger portfolio of retail sites in our GDSO segment. Expansion CapEx totaled $38.3 million for the year with $25.4 million in raze and rebuilds; expansion and improvements at our retail gas stations and new-to-industry sites, including $5.7 million related to the addition of the 22 O'Connell sites. We invested approximately $7.9 million in terminal assets, including $7.5 million in dock and infrastructure expansion at our Oregon facility, and approximately $5 million in other expansion projects, including IT.

We currently expect 2017 maintenance CapEx of approximately $35 million to $45 million, and expansion CapEx of approximately $25 million to $35 million in 2017, relating primarily to investments in our gas station business.

Turning to our balance sheet, as of December 31, 2016, the Partnership had total borrowings of $641.3 million under our $1.475 billion facility. Borrowings consisted of $216.7 million under our $575 million revolving credit facility, and $424.6 million under our $900 million working capital facility.

Our leverage, as defined in our credit agreement, was 4.3 times at the end of the quarter. As we have said on prior calls, our goal is to maintain a strong balance sheet with ample liquidity. And we target long-term leverage of 4 times or lower.

We are pleased with the progress we have made on that front this year. At the end of the first quarter, last year, leverage was 4.6 times, with borrowings under revolver of $275 million. With proceeds from asset sales and the sale-leaseback, we reduced outstandings approximately $58 million to $216.7 million and financed the $61.7 million early lease termination payments.

In 2016, we sold more than 75 sites, excluding the 30 sale-leaseback sites. And as of 12/31/16, we had more than 40 sites held for sale, and so expect incremental proceeds from sales in the next few quarters.

In addition, we received more than $16 million in cash proceeds from the sale of our nat gas business, which closed in February. Our actions have positioned us to invest in our business, pursue opportunities, and move closer to our long-term leverage target.

For the full-year 2017, we expect to generate EBITDA in the range of $190 million to $220 million, which guidance excludes the gain or loss on the sale and disposition of assets and any impairment charges.

Now we are happy to take your questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions). Barrett Blaschke, MUFG Securities.

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Barrett Blaschke, MUFG Securities - Analyst [2]

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With the rail lease payment behind you, and that done, could you give us your long-term outlook for the rail business out of the Bakken?

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Mark Romaine, Global Partners LP - COO [3]

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When we look forward at the rail opportunities out of the Bakken, I think we are planning for very little activity. You've got the development of large pipeline capacity to move incremental barrels out of that region into the Mid-Continent and down into the Gulf. So it's likely that the rail opportunities will be limited.

So when we look forward, we plan for the worst, but we will be prepared to execute on opportunities as they arise. We still have crude capabilities in Albany and on the West Coast. So, should that market change, we will be positioned to execute accordingly.

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Barrett Blaschke, MUFG Securities - Analyst [4]

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And actually a nice segue there. On the West Coast expansion, could you give us a little more color around that?

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Mark Romaine, Global Partners LP - COO [5]

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Sure. We have been working towards -- as we've talked about before, we have been working towards expansion plans on the West Coast that would allow us to increase the amount of storage, the number of rail offloading spots, and the pipeline capabilities so that we could handle segregated products. At the moment, we are evaluating opportunities with customers and counterparties. And so when we have the right opportunity, we will look forward to move on those expansion opportunities.

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Barrett Blaschke, MUFG Securities - Analyst [6]

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Okay. And then one last one, if I can, which is just -- you guys were talking about how the terminaling business has gotten stronger. What's the motivation behind selling these six? Are they just non-core, or what's the logic on running a process on six of the terminals?

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Eric Slifka, Global Partners LP - President and CEO [7]

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Basically, we feel that they are non-strategic to our business. And frankly, we will take a look at what sort of values we get, and then we will decide if we are better off keeping them or if we are better off selling them. But I think this is all the same kind of process as we are doing with the gas stations. You evaluate; and if you can get a higher, better utilization out of it in a different form, that's the way we will move forward with it.

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Barrett Blaschke, MUFG Securities - Analyst [8]

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Okay, thank you.

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Operator [9]

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Ben Brownlow, Raymond James.

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Ben Brownlow, Raymond James & Associates, Inc. - Analyst [10]

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Just to follow up, or get a little deeper on the crude oil product margin, how should we think about that product margin for 2017, just given the $12 million lease expense and the take-or-pay contracts that you may still have coming through?

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Daphne Foster, Global Partners LP - CFO [11]

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We don't give specific guidance for specific product margins. Obviously, there is an uplift of $30 million or so year-over-year in terms of the railcar lease or absence thereof, or reduction, if you will, in 2017 versus 2016. I think certainly 2016 reflects not only the larger lease expense, but some volume activity as well as contribution from our take-or-pay contract. We've got another year or so in that contract that matures in mid-2018. So expect continued revenues from that contract, but certainly lower lease expense.

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Ben Brownlow, Raymond James & Associates, Inc. - Analyst [12]

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So as another way to phrase it, when you think about the fourth-quarter run rate, when you back out -- I think it was around $19 million of accrued income that ran through that fourth quarter, if that -- if you back that out, and you are kind of at a $5 million quarterly loss run rate, is that a fair run rate? And then sort of -- or is that fair, kind of $5 million loss run rate before that lease expense was cut?

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Daphne Foster, Global Partners LP - CFO [13]

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Yes. I think that's a hard one to actually pin -- I don't necessarily want to provide guidance specifically on that product margin. I think that the overall guidance that we've given is the way I would look at it; and sort of the $190 million to $220 million versus the $210 million we came in today.

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Ben Brownlow, Raymond James & Associates, Inc. - Analyst [14]

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Okay. And just to confirm, there was $19 million in the fourth quarter? Was that correct? Of accrued income and net product margin?

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Daphne Foster, Global Partners LP - CFO [15]

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It was actually more than $19 million in the fourth quarter. We stood at the end of the third quarter, and we said that year-to-date the take-or-pay contribution related to absence of nominations was about $19 million. And in the second and third quarter, it was about $8 million each. So you add another $8 million, and you get to about $28 million in terms of revenue in the fourth quarter related to that contract.

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Ben Brownlow, Raymond James & Associates, Inc. - Analyst [16]

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Okay, that's helpful. Thank you. And just one last one for me -- on the GDSO segment, can you give us the site count of Company-operated locations at quarter end? And how do you think about -- we've seen some of your peers dealerizing company-operated locations just to improve that cash flow stability. How do you think about that, and where do you see the ultimate mix going over the next 12 to 24 months?

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Daphne Foster, Global Partners LP - CFO [17]

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Okay, I can give you the site count. At the end of year, end of the quarter, we had 248 Company-operated sites.

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Mark Romaine, Global Partners LP - COO [18]

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Yes. And then with respect to the second part of your question, as far as the operating model for the sites, I think at the moment we have a few different operating models. We've got Company-operated sites, we've got dealer-leased sites, and then we've got commissioned agent sites. And we have -- the balance that we have today, I think, is a balance that fits us well. We will look at every site individually, as we always have, and will continue to do, to determine what the best operating model for that site is.

If we feel that we can add value or extract value from a Company-operated model, we will certainly pursue that. If we think that asset is better off in the hands of a dealer or a commissioned agent, then we will expand in that manner as well.

So I don't think we have a specific mix that we are targeting. It really boils down to what's the best operating model for a particular site. And certainly, as we build some newer sites in the marketplace, I would expect those are likely going to be Company-operated stores. But it's one of those things that we will look at site-by-site.

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Ben Brownlow, Raymond James & Associates, Inc. - Analyst [19]

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That makes sense. Thank you for the color.

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Operator [20]

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Gabe Moreen, Bank of America.

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Gabe Moreen, BofA Merrill Lynch - Analyst [21]

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Just a quick question in terms of this fantastic weather we've been having so far in the first quarter (laughter) and how that is playing into guidance or not. Is it safe to assume that lower end of the range may factor in some of that fantastic weather, so quote-unquote?

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Daphne Foster, Global Partners LP - CFO [22]

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Yes, the guidance that we are putting out today does reflect the warm weather that we are seeing thus far.

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Gabe Moreen, BofA Merrill Lynch - Analyst [23]

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Okay. So in other words, even the lower end of that range -- sorry, the upper end of that range has some warm weather in it, too, Daphne? Is that fair?

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Daphne Foster, Global Partners LP - CFO [24]

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Are you trying to get me to one end or the other? (laughter)

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Gabe Moreen, BofA Merrill Lynch - Analyst [25]

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Well, you know, look, I'm just trying to see what's in it. Because just saying warm weather kind of factored in throughout the range or just -- okay.

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Daphne Foster, Global Partners LP - CFO [26]

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Yes, and another way I'd look at it is -- I can give you another way to think about our guidance for this year. We came in, with all the adjustments, at $210 million or so, for 2016. And we talked about the $30 million in lower lease expense in 2017 versus 2016. Wholesale gasoline and gasoline blendstocks -- if you look at that product margin, it was a banner year at $83 million or $84 million, which is about $18 million more than last year. So that's something to point to as an adjustment, if you will, relative to 2016. And then you have warmer weather. So that's how you get to the band between $190 million and $220 million.

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Gabe Moreen, BofA Merrill Lynch - Analyst [27]

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Okay, perfect. Thanks, Daphne. And then I know in the past you've said that RINs really don't matter that much. But given what's happening in DC, and I think the extreme fluctuation in the price of RINs, I just want to reconfirm that RINs really isn't something you are watching very closely, given your business.

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Mark Romaine, Global Partners LP - COO [28]

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RINs, as we've described in the past, have been a pass-through for us. And I know, certainly, there has been a lot of volatility in the market, and we are generally insulated from that.

I think the other thing hanging out there is the potential shift in point of obligation. And without knowing exactly what the mechanics will look like for that, because there hasn't been a lot of information around that, but imagining what we can about what that might look like, we would not expect a shift in the point of obligation to have a material effect on us.

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Gabe Moreen, BofA Merrill Lynch - Analyst [29]

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Thanks, Mark. And then last question for me -- I know you do give guidance on long-term leverage targets. Can you talk also maybe a little bit about long-term targets on distribution coverage, particularly since it seems like you will hopefully be getting to those long-term leverage targets sooner rather than later?

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Eric Slifka, Global Partners LP - President and CEO [30]

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So what's the question, Gabe? Is there --?

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Gabe Moreen, BofA Merrill Lynch - Analyst [31]

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Just in terms of just cash distribution coverage, if the trailing 12 months at approximately 1.4-ish coverage, whether you are comfortable with that level, Eric, or whether you think you can run lower than that, et cetera, et cetera.

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Eric Slifka, Global Partners LP - President and CEO [32]

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The Board always reviews what our distribution is on a quarter-quarter basis. And I think that's going to just continue, Gabe. Sorry that's not much of an answer, but I don't know what else to say.

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Gabe Moreen, BofA Merrill Lynch - Analyst [33]

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No. Figured I would try. Thanks, Eric. (laughter)

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Operator [34]

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Lin Shen, HITE.

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Lin Shen, HITE Hedge Asset Management - Analyst [35]

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I just wanted to, first of all, clarify that the guidance you are giving for 2017 still includes the terminal asset you plan to sell.

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Eric Slifka, Global Partners LP - President and CEO [36]

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Yes.

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Daphne Foster, Global Partners LP - CFO [37]

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Yes, it does.

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Lin Shen, HITE Hedge Asset Management - Analyst [38]

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Okay. And also, for the asset sale; so Eric, what kind of like EBITDA multiple do you expect to get to think that a good value?

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Eric Slifka, Global Partners LP - President and CEO [39]

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Look, I don't -- I will only know when offers really come in. And we will analyze it. And obviously the hurdle rate is going to be is, am I better off selling it than keeping it? And so has the cash got more value in my pocket as opposed to hanging out there on that asset? And it varies, types of assets, so you just won't know until you see the level of interest that you have. There's really a group of different types of assets that may fit somebody who has a particular situation.

I remember when we were a very small company, and we would look at an asset differently than anyone else. And that's what made us and allowed us to really grow the business. So someone else may just have a different view and a different reason, and different synergies than we may ever be able to create around that asset. So that's why we are going through the process to test the market and see what is or is not there.

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Lin Shen, HITE Hedge Asset Management - Analyst [40]

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And also the main reason -- is there a reason you want to sell the asset is you're under the pressure to reduce debt, to delever?

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Eric Slifka, Global Partners LP - President and CEO [41]

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No. I think this is literally just -- we are going to test the market and see if we can make some hurdle rates. And if we can, then we will look to move forward. But it's not about reduction. It's really the opposite of that. I think it's actually being on the offense, actually, not on the defense.

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Lin Shen, HITE Hedge Asset Management - Analyst [42]

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Great. Okay, thank you. I think James is also on the phone.

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James Jampel, HITE Hedge Asset Management - Analyst [43]

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It was just a little bit -- it was not something that we had expected to see in the press release, the -- oh, my God, they are selling off pieces of the core. That was my first reaction. I said, wow.

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Eric Slifka, Global Partners LP - President and CEO [44]

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Don't look at it like that. There is no difference between what we did with our gas stations and what we are doing with our terminals. Right? This is literally -- we are being strong in the way that we are attacking this, really. It's not out of weakness in any way, shape or form. I don't have to sell anything. If the process doesn't go the way that we hoped, that's fine. We may have one or two sites that may have more value as real estate. If there's a development, then we will work through that. It's just maximizing value. That's all it is.

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James Jampel, HITE Hedge Asset Management - Analyst [45]

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Is this about the 10th of your capacity or a little bit less?

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Eric Slifka, Global Partners LP - President and CEO [46]

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If you look at it as a percentage of total capacity.

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James Jampel, HITE Hedge Asset Management - Analyst [47]

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Okay.

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Eric Slifka, Global Partners LP - President and CEO [48]

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But the important metric is always EBITDA returns that you have on individual asses.

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James Jampel, HITE Hedge Asset Management - Analyst [49]

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Yes. We thought of your business, perhaps mistakenly, that in the terminaling, building up market share or controlling assets was really, really important. And letting them go to, potentially, competitors might not be a good thing. But I guess the (multiple speakers)

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Eric Slifka, Global Partners LP - President and CEO [50]

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Obviously, we are thoughtful.

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James Jampel, HITE Hedge Asset Management - Analyst [51]

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Next, on the expansion CapEx and the gasoline business that you talked about, what is that likely to be?

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Daphne Foster, Global Partners LP - CFO [52]

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Expansion CapEx?

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James Jampel, HITE Hedge Asset Management - Analyst [53]

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Yes.

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Daphne Foster, Global Partners LP - CFO [54]

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Well, the $25 million to $35 million that we are guiding today for expansion CapEx in 2017 is going to largely be in the retail business. And it will be raze and rebuilds and some NTI work and some image enhancement, rebranding, maybe some co-branding; so those sorts of investments that we've done historically.

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James Jampel, HITE Hedge Asset Management - Analyst [55]

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So there's not a thought of acquisition here?

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Eric Slifka, Global Partners LP - President and CEO [56]

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What do you mean?

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Daphne Foster, Global Partners LP - CFO [57]

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There's no acquisition in the $25 million to $35 million that I gave to you.

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Eric Slifka, Global Partners LP - President and CEO [58]

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I think the whole point here is is that the Company is in a position where we can do deals. And we are going to look for transactions, and we are going to try and grow the business. And whether that's acquiring other terminals, whether that's investing in the retail business through NTIs, or whether that's acquiring other companies, I'd say the availability that the Company have to go out into transactions now -- we are in a good spot to go grow the Company.

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James Jampel, HITE Hedge Asset Management - Analyst [59]

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Great. Well, that's great to hear. Then I just got a couple more. I noticed in the press release there was this long polemic about your inability to forecast net income and some other measures. What drove you to put that in there, this time?

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Daphne Foster, Global Partners LP - CFO [60]

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Because it is a requirement, when you give guidance or forward guidance of a non-GAAP measure, that if without unreasonable effort if you can also provide GAAP measure, the nearest GAAP measure, then you do so.

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James Jampel, HITE Hedge Asset Management - Analyst [61]

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Oh, I see. Okay. And then, last, I'll give one more go at it. The guidance is $190 million to $220 million. What would the guidance have been, had weather been normal so far?

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Daphne Foster, Global Partners LP - CFO [62]

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That's an interesting question. Basically, the $190 million to $220 million does cover the weather. And that's, I guess, all I can say.

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James Jampel, HITE Hedge Asset Management - Analyst [63]

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Okay, thanks.

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Operator [64]

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Barrett Blaschke, MUFG Securities.

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Barrett Blaschke, MUFG Securities - Analyst [65]

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One just quick follow-up. And that is if we are thinking of raze and rebuild and CapEx, how much of the raze and rebuilds, particularly, is assigned to maintenance? And how much is assigned to growth CapEx? Is there a split there?

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Daphne Foster, Global Partners LP - CFO [66]

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There is some captured in maintenance CapEx, and it's really done on an individual site-by-site basis. And you are looking at returns going forward, and what would be deemed to be just straight maintenance. and what is actually expanding the cash flows of that site.

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Barrett Blaschke, MUFG Securities - Analyst [67]

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And then just so I can understand it a little better, about how many raze and rebuilds are you talking about in 2017 for this kind of a number?

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Daphne Foster, Global Partners LP - CFO [68]

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Well, just in general, raze and rebuilds can cost in the $2 million to $3 million range, or $1.5 million to $3 million range. So that's -- it just depends on the individual site, and whether you are going to build out the store to a larger footprint or not.

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Eric Slifka, Global Partners LP - President and CEO [69]

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You are picking your better sites. The ones that you are spending net capital on are the ones that you think have more opportunity to do better.

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Barrett Blaschke, MUFG Securities - Analyst [70]

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Okay, thank you.

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Operator [71]

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There are no further questions in the queue. I'd like to hand the call back over to Mr. Slifka for closing comments.

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Eric Slifka, Global Partners LP - President and CEO [72]

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

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Operator [73]

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