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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For the fiscal year ended December 31, 2019
OR
Commission file number 001‑‑32593
Global Partners LP
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
Delaware
74‑‑3140887
(I.R.S. Employer Identification No.)
P.O. Box 9161
800 South Street
Waltham, Massachusetts 02454‑‑9161
(Address of principal executive offices, including zip code)
(781) 894‑‑8800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of class
Common Units representing limited partner interests
9.75% Series A Fixed-to-Floating Cumulative Redeemable
Perpetual Preferred Units representing limited partner interests
Trading Symbol(s)
GLP
GLP pr A
Name of exchange on which registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S‑T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☐
Accelerated filer ☒
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ☐ No ☒
The aggregate market value of common units held by non‑affiliates of the registrant (treating directors and executive officers of the registrant’s general partner
and their affiliates, for this purpose, as if they were affiliates of the registrant) as of June 28, 2019 was approximately $528,864,114 based on a price per common
unit of $19.91, the price at which the common units were last sold as reported on the New York Stock Exchange on such date.
As of March 4, 2020, 33,995,563 common units were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
Table of Contents
PART I
Items 1. and 2.
Item 1A.
Item 1B.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
TABLE OF CONTENTS
Business and Properties
Risk Factors
Unresolved Staff Comments
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
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Forward‑‑Looking Statements
Certain statements and information in this Annual Report on Form 10‑K may constitute “forward‑looking statements.”
The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions
are intended to identify forward‑looking statements, which are generally not historical in nature. These forward‑looking
statements are based on our current expectations and beliefs concerning future developments and their potential effect on us.
While management believes that these forward‑looking statements are reasonable as and when made, there can be no assurance
that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future
revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of
any future acquisitions. Our forward‑looking statements involve significant risks and uncertainties (some of which are beyond our
control) and assumptions that could cause actual results to differ materially from our historical experience and our present
expectations or projections. Known material factors that could cause our actual results to differ from those in the forward-looking
statements are those described in Part I, Item 1A. “Risk Factors.” These risks and uncertainties include, among other things:
· We may not have sufficient cash from operations to enable us to pay distributions on our Series A Preferred Units
(as defined below) or maintain distributions on our common units at current levels following establishment of cash
reserves and payment of fees and expenses, including payments to our general partner.
· A significant decrease in price or demand for the products we sell or a significant decrease in the pricing of and
demand for our logistics activities could have an adverse effect on our financial condition, results of operations and
cash available for distribution to our unitholders.
· We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics
activities in transporting the products we sell. Implementation of regulations and directives that adversely impact the
market for transporting these products by rail or otherwise could adversely affect those activities. In addition,
implementation of regulations and directives related to these aforementioned services as well as a disruption in any
of these transportation services could have an adverse effect on our financial condition, results of operations and
cash available for distribution to our unitholders.
· We have contractual obligations for certain transportation assets such as railcars, barges and pipelines. A decline in
demand for (i) the products we sell or (ii) our logistics activities, which has resulted and could continue to result in a
decrease in the utilization of our transportation assets, could negatively impact our financial condition, results of
operations and cash available for distribution to our unitholders.
· We may not be able to fully implement or capitalize upon planned growth projects. Even if we consummate
acquisitions or expend capital in pursuit of growth projects that we believe will be accretive, they may in fact result
in no increase or even a decrease in cash available for distribution to our unitholders.
·
Erosion of the value of major gasoline brands could adversely affect our gasoline sales and customer traffic.
· Our gasoline sales could be significantly reduced by a reduction in demand due to higher prices and to new
technologies and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative
fuel‑powered motor vehicles. Changing consumer preferences or driving habits could lead to new forms of fueling
destinations or potentially fewer customer visits to our sites, resulting in a decrease in gasoline sales and/or sales of
food, sundries and other on-site services. Any of these outcomes could negatively affect our financial condition,
results of operations and cash available for distribution to our unitholders.
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·
Physical effects from climate change and impacts to areas prone to sea level rise or other extreme weather events
could have the potential to adversely affect our assets and operations.
· Changes in government usage mandates and tax credits could adversely affect the availability and pricing of ethanol
and renewable fuels, which could negatively impact our sales.
· Our petroleum and related products sales, logistics activities and results of operations have been and could continue
to be adversely affected by, among other things, changes in the petroleum products market structure, product
differentials and volatility (or lack thereof), implementation of regulations that adversely impact the market for
transporting petroleum and related products by rail and other modes of transportation, severe weather conditions,
significant changes in prices and interruptions in transportation services and other necessary services and
equipment, such as railcars, barges, trucks, loading equipment and qualified drivers.
· Our risk management policies cannot eliminate all commodity risk, basis risk or the impact of unfavorable market
conditions, each of which can adversely affect our financial condition, results of operations and cash available for
distribution to our unitholders. In addition, noncompliance with our risk management policies could result in
significant financial losses.
· Our results of operations are affected by the overall forward market for the products we sell, and pricing volatility
may adversely impact our results.
· Our businesses could be affected by a range of issues, such as changes in commodity prices, energy conservation,
competition, the global economic climate, movement of products between foreign locales and within the United
States, changes in refiner demand, weekly and monthly refinery output levels, changes in local, domestic and
worldwide inventory levels, changes in health, safety and environmental regulations, including, without limitation,
those related to climate change, failure to obtain renewal permits on terms favorable to us, seasonality, supply,
weather and logistics disruptions and other factors and uncertainties inherent in the transportation, storage,
terminalling and marketing of refined products, gasoline blendstocks, renewable fuels and crude oil.
·
Increases and/or decreases in the prices of the products we sell could adversely impact the amount of availability for
borrowing working capital under our credit agreement, which credit agreement has borrowing base limitations and
advance rates.
· Warmer weather conditions could adversely affect our home heating oil and residual oil sales. Our sales of home
heating oil and residual oil continue to be reduced by conversions to natural gas and by utilization of propane and/or
natural gas (instead of heating oil) as primary fuel sources.
· We are exposed to trade credit risk and risk associated with our trade credit support in the ordinary course of our
businesses.
·
The condition of credit markets may adversely affect our liquidity.
· Our credit agreement and the indentures governing our senior notes contain operating and financial covenants, and
our credit agreement contains borrowing base requirements. A failure to comply with the operating and financial
covenants in our credit agreement, the indentures and any future financing agreements could impact our access to
bank loans and other sources of financing as well as our ability to pursue our business activities.
· A significant increase in interest rates could adversely affect our results of operations and cash available for
distribution to our unitholders and our ability to service our indebtedness.
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· Our gasoline station and convenience store business could expose us to an increase in consumer litigation and result
in an unfavorable outcome or settlement of one or more lawsuits where insurance proceeds are insufficient or
otherwise unavailable.
· Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine
products, and the FDA and states have enacted and are pursuing enaction of numerous regulations restricting the
sale of such products. These governmental actions, as well as national, state and municipal campaigns to discourage
smoking, tax increases, and imposition of regulations restricting the sale of e-cigarettes and vapor products, have
and could result in reduced consumption levels, higher costs which we may not be able to pass on to our customers,
and reduced overall customer traffic. Also, increasing regulations related to and restricting the sale of vapor
products and e-cigarettes may offset some of the gains we have experienced from selling these types of products.
These factors could materially affect the sale of this product mix which in turn could have an adverse effect on our
financial condition, results of operations and cash available for distribution to our unitholders.
· Our results can be adversely affected by unforeseen events, such as adverse weather, natural disasters, terrorism,
pandemics, or other catastrophic events which could have an adverse effect on our financial condition, results of
operations and cash available for distributions to our unitholders.
· Our businesses could expose us to litigation and result in an unfavorable outcome or settlement of one or more
lawsuits where insurance proceeds are insufficient or otherwise unavailable.
· Adverse developments in the areas where we conduct our businesses could have a material adverse effect on such
businesses and could reduce our ability to make distributions to our unitholders.
· A serious disruption to our information technology systems could significantly limit our ability to manage and
operate our businesses efficiently.
· We are exposed to performance risk in our supply chain.
· Our businesses are subject to federal, state and municipal environmental and non-environmental regulations which
could have a material adverse effect on such businesses.
· Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which could permit them
to favor their own interests to the detriment of our unitholders.
· Unitholders have limited voting rights and are not entitled to elect our general partner or its directors or remove our
general partner without the consent of the holders of at least 66 2/3% of the outstanding common units (including
common units held by our general partner and its affiliates), which could lower the trading price of our units.
· Our tax treatment depends on our status as a partnership for federal income tax purposes.
· Unitholders may be required to pay taxes on their share of our income even if they do not receive any cash
distributions from us.
Readers are cautioned not to place undue reliance on forward‑looking statements, which speak only as of the date
hereof. We undertake no obligation to publicly update or revise any forward‑looking statements after the date they are made,
whether as a result of new information, future events or otherwise.
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Available Information
We make available free of charge through our website, www.globalp.com, our Annual Reports on Form 10‑K, Quarterly
Reports on Form 10‑Q, Current Reports on Form 8‑K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file or
furnish such material with the Securities and Exchange Commission (“SEC”). These documents are also available at the SEC’s
website at www.sec.gov. Our website also includes our Code of Business Conduct and Ethics, our Governance Guidelines and the
charters of our Audit Committee and Compensation Committee.
A copy of any of these documents will be provided without charge upon written request to the General Counsel, Global
Partners LP, P.O. Box 9161, 800 South Street, Suite 500, Waltham, MA 02454; fax (781) 398‑9211.
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References in this Annual Report on Form 10‑K to “Global Partners LP,” “Partnership,” “we,” “our,” “us” or like
terms refer to Global Partners LP and its subsidiaries. References to “our general partner” refer to Global GP LLC.
PART I
Items 1. and 2. Business and Properties.
Overview
We are a master limited partnership formed in March 2005. We own, control or have access to one of the largest
terminal networks of refined petroleum products and renewable fuels in Massachusetts, Maine, Connecticut, Vermont, New
Hampshire, Rhode Island, New York, New Jersey and Pennsylvania (collectively, the “Northeast”). We are one of the region’s
largest independent owners, suppliers and operators of gasoline stations and convenience stores. As of December 31, 2019, we
had a portfolio of 1,551 owned, leased and/or supplied gasoline stations, including 289 directly operated convenience stores,
primarily in the Northeast. We are also one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to
wholesalers, retailers and commercial customers in the New England states and New York. We engage in the purchasing, selling,
gathering, blending, storing and logistics of transporting petroleum and related products, including gasoline and gasoline
blendstocks (such as ethanol), distillates (such as home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil
and propane and in the transportation of petroleum products and renewable fuels by rail from the mid‑continent region of the
United States and Canada.
We purchase refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane primarily from
domestic and foreign refiners and ethanol producers, crude oil producers, major and independent oil companies and trading
companies. We operate our businesses under three segments: (i) Wholesale, (ii) Gasoline Distribution and Station Operations
(“GDSO”) and (iii) Commercial.
Global GP LLC, our general partner, manages our operations and activities and employs our officers and substantially
all of our personnel, except for most of our gasoline station and convenience store employees who are employed by our wholly
owned subsidiary, Global Montello Group Corp. (“GMG”).
2019 Events
2027 Notes Offering and 2022 Notes Tender Offer and Redemption— On July 31, 2019, we and GLP Finance Corp. (the
“Issuers”) issued $400.0 million aggregate principal amount of 7.00% senior notes due 2027 (the “2027 Notes”) to several initial
purchasers (the “2027 Notes Initial Purchasers”) in a private placement exempt from the registration requirements under the
Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes were resold by the 2027 Notes Initial Purchasers to
qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to
Regulation S under the Securities Act. We used the net proceeds from the offering to fund the repurchase of our 6.25% senior
notes due 2022 (the “2022 Notes”) in a tender offer and to repay a portion of the borrowings outstanding under our credit
agreement. The redemption of the 2022 Notes occurred on August 30, 2019. Please read Note 8 of Notes to Consolidated
Financial Statements for additional information on the 2027 Notes.
Amended Credit Agreement— On April 19, 2019, we entered into the third amendment to the third amended and restated
credit agreement which, among other things, extended the maturity date from April 30, 2020 to April 29, 2022 and reduced by
0.25% the applicable rate under the revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of
funds rate loans and for issuances of letters of credit. Please read Note 8 of Notes to Consolidated Financial Statements for
additional information on our credit agreement.
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2018 Event
Series A Preferred Unit Offering—On August 7, 2018, we issued 2,760,000 9.75% Series A Fixed-to-Floating Rate
Cumulative Redeemable Perpetual Preferred Units representing limited partner interests (the “Series A Preferred Units”) for
$25.00 per Series A Preferred Unit in an offering registered under the Securities Act of 1933. We used the proceeds, net of
underwriting discount and expenses, of $66.4 million to reduce indebtedness under our credit agreement. See Note 18 of Notes to
Consolidated Financial Statements for additional information.
Operating Segments
We operate our businesses under three segments: (i) Wholesale, (ii) GDSO and (iii) Commercial. In 2019, our
Wholesale, GDSO and Commercial sales accounted for approximately 57%, 33% and 10% of our total sales, respectively.
Wholesale
In our Wholesale segment, we engage in the logistics of selling, gathering, blending, storing and transporting refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We transport these products by railcars, barges,
trucks and/or pipelines pursuant to spot or long‑term contracts. From time to time, we aggregate crude oil by truck or pipeline in
the mid‑continent region of the United States and Canada, transport it by rail and ship it by barge to refiners. We sell home
heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene, residual oil and propane to home heating
oil and propane retailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to take
delivery of the gasoline, distillates and propane at bulk terminals and inland storage facilities that we own or control or at which
we have throughput or exchange arrangements. Ethanol is shipped primarily by rail and by barge.
Gasoline Distribution and Station Operations
In our GDSO segment, gasoline distribution includes sales of branded and unbranded gasoline to gasoline station
operators and sub-jobbers. Station operations include (i) convenience stores, (ii) rental income from gasoline stations leased to
dealers, from commissioned agents and from cobranding arrangements and (iii) sundries (such as car wash sales and lottery and
ATM commissions).
As of December 31, 2019, we had a portfolio of owned, leased and/or supplied gasoline stations, primarily in the
Northeast, that consisted of the following:
Company operated
Commissioned agents
Lessee dealers
Contract dealers
Total
Commercial
289
258
216
788
1,551
In our Commercial segment, we include sales and deliveries to end user customers in the public sector and to large
commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and bunker fuel. In the
case of public sector commercial and industrial end user customers, we sell products primarily either through a competitive
bidding process or through contracts of various terms. We respond to publicly issued requests for product proposals and
quotes. We generally arrange for the delivery of the product to the customer’s designated location. Our Commercial segment also
includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity.
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Products
General
The following table presents our product sales and other revenues as a percentage of our consolidated sales for the years
ended December 31:
Gasoline sales: gasoline and gasoline blendstocks (such as ethanol)
Distillates (home heating oil, diesel and kerosene), residual oil and propane sales
Crude oil sales and crude oil logistics revenue
Convenience store sales, rental income and sundries
Total
2019
2018
2017
75 %
21 %
1 %
3 %
100 %
74 %
22 %
1 %
3 %
100 %
65 %
26 %
5 %
4 %
100 %
Gasoline. We sell substantially all grades of branded and unbranded gasoline and we sell gasoline blendstocks, such as
ethanol, that comply with seasonal and geographical requirements in the areas in which we market.
Distillates. Distillates are primarily divided into home heating oil, diesel and kerosene. In 2019, sales of home heating
oil, diesel and kerosene accounted for approximately 47%, 52% and 1%, respectively, of our total volume of distillates sold. The
distillates we sell are used primarily for fuel for trucks and off‑road construction equipment and for space heating of residential
and commercial buildings.
We sell generic home heating oil and Heating Oil Plus™, our proprietary premium branded heating oil that is
electronically blended at the delivery facility, to wholesale distributors and retailers. In addition, we sell the additive used to
create Heating Oil Plus™ to some wholesale distributors, make injection systems available to them and provide technical support
to assist them with blending. We also educate the sales force of our customers to better prepare them for marketing our products
to their customers.
We have a fixed price sales program that we market primarily to wholesale distributors and retailers which uses the New
York Mercantile Exchange (“NYMEX”) heating oil contract as the pricing benchmark and as the vehicle to manage the
commodity risk. Please read “—Commodity Risk Management.” In 2019, approximately 33% of our home heating oil volume
was sold using forward fixed price contracts. A forward fixed price contract requires our customer to purchase a specific volume
at a specific price during a specific period. The remaining home heating oil volume was sold on either a posted price or a price
based on various indices which, in both instances, reflect current market conditions.
We sell generic diesel and Diesel One , our proprietary premium diesel fuel product. We offer marketing and technical
®
®
support for those customers who purchase Diesel One .
Residual Oil. We sell residual oil to industrial, commercial and marine customers. We specially blend product for users
in accordance with their individual power specifications and for marine transport.
Propane. We sell propane to home heating oil and propane retailers and wholesale distributors primarily from our
rail‑fed propane storage and distribution facility near our Church Street terminal in Albany, New York.
Crude Oil. We engage in the purchasing, selling, storing and logistics of transporting domestic and Canadian crude oil
and other products via pipeline, rail and barge from the mid‑continent region of the United States and Canada for distribution to
refiners and other customers.
Convenience Store Items and Sundries. We sell a broad selection of food, beverages, snacks, grocery and non‑food
merchandise at our convenience store locations and generate sundry sales, such as car wash sales and lottery and ATM
commissions, at our convenience store locations.
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Significant Customers
None of our customers accounted for greater than 10% of total sales for years ended December 31, 2019, 2018
and 2017.
Assets
Terminals
As of December 31, 2019, we owned, leased or maintained dedicated storage facilities at 24 bulk terminals, each with
the capacity of more than 50,000 barrels, with a collective storage capacity of approximately 10.8 million barrels. Twenty‑one of
these bulk terminals are located throughout the Northeast. Some of our storage tankage is versatile, allowing us to switch tankage
from one product to another.
In addition to refined products, we also own or operate two rail facilities in New York and Oregon capable of handling
ethanol and other products and two rail facilities in North Dakota capable of handling crude oil. At select locations, we have
capacity to store renewable fuels, and in Albany, New York, we also have an additional rail‑fed propane storage terminal.
The bulk terminals and inland storage facilities from which we distribute product are supplied by ship, barge, truck,
pipeline and/or rail. The inland storage facilities, which we use primarily to store distillates, are supplied with product delivered
by truck from bulk terminals. Our customers receive product from our network of bulk terminals and inland storage facilities via
truck, ship, barge, rail and/or pipeline.
In connection with our businesses, we may lease or otherwise secure the right to use certain third-party assets (such as
railcars, pipelines and barges). As of December 31, 2019, we supported our rail activity with a fleet of approximately 200 leased
railcars. The makeup of this fleet is split between general‑purpose cars used for refined products and pressurized tank cars used
for propane. We lease railcars from third parties through various lease arrangements with various expiration dates, and we also
lease barges from third parties through various time charter lease arrangements also with various expiration dates. We also have
various pipeline connection agreements that extend for two to five years.
Many of our bulk terminals operate 24 hours a day and consist of multiple storage tanks and automated truck loading
equipment. These automated systems monitor terminal access, volumetric allocations, credit control and carrier certification
through the remote identification of customers. In addition, some of the bulk terminals from which we market are equipped with
truck loading racks capable of providing automated blending and additive packages which meet our customers’ specific
requirements.
Throughput arrangements allow storage of product at terminals owned by others. We or our customers can load product
at these terminals, and we pay the owners of these terminals fees for services rendered in connection with the receipt, storage and
handling of such product. Compensation to the terminal owners may be fixed or based upon the volume of our product that is
delivered and sold at the terminal. Logistics agreements may require counterparties to throughput a minimum volume over an
agreed-upon period and may include make-up rights if the minimum volume is not met.
We have exchange agreements with customers and suppliers. An exchange is a contractual agreement where the parties
exchange product at their respective terminals or facilities. For example, we (or our customers) receive product that is owned by
our exchange partner from such party’s facility or terminal, and we deliver the same volume of our product to such party (or to
such party’s customers) out of one of the terminals in our terminal network. Generally, both sides of an exchange transaction pay
a handling fee (similar to a throughput fee), and often one party also pays a location differential that covers any excess
transportation costs incurred by the other party in supplying product to the location at which the first party receives product. Other
differentials that may occur in exchanges (and result in additional payments) include product value differentials and timing
differentials.
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Gasoline Stations
As of December 31, 2019, we had a portfolio of 1,551 owned, leased and/or supplied gasoline stations, including
289 directly operated convenience stores, primarily in the Northeast.
At our company‑operated stores, we operate the gasoline stations and convenience stores with our employees, and we
set the retail price of gasoline at the station. At commissioned agent locations, we own the gasoline inventory, and we set the
retail price of gasoline at the station and pay the commissioned agent a fee related to the gallons sold. We receive rental income
from commissioned agent leased gasoline stations for the leasing of the convenience store premises, repair bays and other
businesses that may be conducted by the commissioned agent. At dealer‑leased locations, the dealer purchases gasoline from us,
and the dealer sets the retail price of gasoline at the dealer’s station. We also receive rental income from (i) dealer‑leased gasoline
stations and (ii) cobranding arrangements. We also supply gasoline to locations owned and/or leased by independent contract
dealers. Additionally, we have contractual relationships with distributors in certain New England states pursuant to which we
source and supply these distributors’ gasoline stations with ExxonMobil‑branded gasoline.
Supply
Our products come from some of the major energy companies in the world as well as North American crude oil
producers. Products can be sourced from the United States, Canada, South America, Europe, Russia and occasionally from Asia.
Most of our products are delivered by water, pipeline, rail or truck. During 2019, we purchased an average of approximately
425,000 barrels per day of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We enter
into supply agreements with these suppliers on a term basis or a spot basis. With respect to trade terms, our supply purchases vary
depending on the particular contract from prompt payment (usually two days) to net 30 days. Please read “—Commodity Risk
Management.” We obtain our convenience store inventory from traditional suppliers.
Seasonality
Due to the nature of our businesses and our reliance, in part, on consumer travel and spending patterns, we may
experience more demand for gasoline during the late spring and summer months than during the fall and winter. Travel and
recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for
gasoline. Therefore, our volumes in gasoline are typically higher in the second and third quarters of the calendar year. As demand
for some of our refined petroleum products, specifically home heating oil and residual oil for space heating purposes, is generally
greater during the winter months, heating oil and residual oil volumes are generally higher during the first and fourth quarters of
the calendar year. These factors may result in fluctuations in our quarterly operating results.
Commodity Risk Management
When we take title to the products that we sell, we are exposed to commodity risk. Commodity risk is the risk of
unfavorable market fluctuations in the price of commodities such as refined petroleum products, gasoline blendstocks, renewable
fuels, crude oil and propane. We endeavor to minimize commodity risk in connection with our daily operations through hedging
by the use of exchange‑traded futures contracts on regulated exchanges or using other over‑the‑counter derivatives, and then lift
hedges as we sell the product for physical delivery to third parties. Products are generally purchased and sold at spot market
prices, fixed prices or indexed prices, with certain adjustments based on quality and freight due to location differences and
prevailing supply and demand conditions, as well as other factors. While we use these transactions to seek to maintain a position
that is substantially balanced within our commodity product purchase and sales activities, we may experience net unbalanced
positions for short periods of time as a result of variances in daily purchases and sales and transportation and delivery schedules
as well as other logistical issues inherent in our businesses, such as weather conditions. In connection with managing these
positions, we are aided by maintaining a constant presence in the marketplace. We also engage in a controlled trading program for
up to an aggregate of 250,000 barrels of commodity products at any one point in time. Our policy is generally to purchase only
products for which we have a market and to structure our sales contracts so that price fluctuations do not materially affect our
profit. While our
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policies are designed to minimize market risk, as well as inherent basis risk, exposure to fluctuations in market conditions
remains.
In addition, because a portion of our crude oil business may be conducted in Canadian dollars, we may use foreign
currency derivatives to minimize the risks of unfavorable exchange rates. These instruments may include foreign currency
exchange contracts and forwards. In conjunction with entering into the commodity derivative, we may enter into a foreign
currency derivative to hedge the resulting foreign currency risk. These foreign currency derivatives are generally short‑term in
nature and not designated for hedge accounting.
Operating results are sensitive to a number of factors. Such factors include commodity location, grades of product,
individual customer demand for grades or location of product, localized market price structures, availability of transportation
facilities, daily delivery volumes that vary from expected quantities and timing and costs to deliver the commodity to the
customer. Basis risk is the inherent market price risk created when a commodity of a certain grade or location is purchased, sold
or exchanged as compared to a purchase, sale or exchange of a commodity at a different time or place, including transportation
costs and timing differentials. We attempt to reduce our exposure to basis risk by grouping our purchase and sale activities by
geographical region and commodity quality in order to stay balanced within such designated region. However, basis risk cannot
be entirely eliminated, and basis exposure, particularly in backward markets (when prices for future deliveries are lower than
current prices) or other adverse market conditions, can adversely affect our financial condition, results of operations and cash
available for distribution to our unitholders.
With respect to the pricing of commodities, we utilize exchange-traded futures contracts and other derivative
instruments to minimize or hedge the impact of commodity price changes on our inventories and forward fixed price
commitments. Any hedge ineffectiveness is reflected in our results of operations. We utilize regulated exchanges, including the
NYMEX, the Chicago Mercantile Exchange (“CME”) and the Intercontinental‑Exchange (“ICE”), which are exchanges for the
respective commodities that each trades, thereby reducing potential delivery and supply risks. Generally, our practice is to close
all exchange positions rather than to make or receive physical deliveries.
We monitor processes and procedures to prevent unauthorized trading by our personnel and to maintain substantial
balance between purchases and sales or future delivery obligations. We can provide no assurance, however, that these steps will
eliminate commodity risk or detect and prevent all violations of such trading processes and procedures, particularly if deception
or other intentional misconduct is involved.
In our Wholesale segment, we obtain Renewable Identification Numbers (“RINs”) in connection with our purchase of
ethanol which is used for bulk trading purposes or for blending with gasoline through our terminal system. A RIN is a renewable
identification number associated with government‑mandated renewable fuel standards. To evidence that the required volume of
renewable fuel is blended with gasoline, obligated parties must retire sufficient RINs to cover their Renewable Volume
Obligation (“RVO”). Our U.S. Environmental Protection Agency (“EPA”) obligations relative to renewable fuel reporting are
comprised of foreign gasoline and diesel that we may import and blending operations at certain facilities. As a wholesaler of
transportation fuels through our terminals, we separate RINs from renewable fuel through blending with gasoline and can use
those separated RINs to settle our RVO. While the annual compliance period for the RVO is a calendar year and the settlement of
the RVO typically occurs by March 31 of the following year, the settlement of the RVO can occur, under certain EPA deferral
actions, more than one year after the close of the compliance period. Our Wholesale segment operating results may be sensitive to
the timing associated with our RIN position relative to our RVO at a point in time, and we may recognize a mark‑to‑market
liability for a shortfall in RINs at the end of each reporting period. To the extent that we do not have a sufficient number of RINs
to satisfy our RVO as of the balance sheet date, we charge cost of sales for such deficiency based on the market price of the RINs
as of the balance sheet date and record a liability representing our obligation to purchase RINs. Our 2016 RIN obligation may
change due to a court decision requiring the EPA to revise the calculation methodology for determining the 2016 renewable fuel
obligation. However, in 2019, the EPA proposed a rule that would retain the 2016 obligation. Even if that rule is not finalized and
our 2016 obligation is retroactively changed, we do not believe that any impacts associated with any such change will have a
material adverse effect on our financial position, results of operations or cash available for distribution to our unitholders.
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For more information about our policies and procedures to minimize our exposure to market risk, including commodity
market risk, please read Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk.”
Competition
In each of our operating segments, we encounter varying degrees of competition based on product and geographic
locations and available logistics. Our competitors include terminal companies, major integrated oil companies and their marketing
affiliates, wholesalers, producers and independent marketers of varying sizes, financial resources and experience. In our markets,
we compete in various product lines and for all customers. In the residual oil markets, however, where product is heated when
stored and cannot be delivered long distances, we face less competition because of the strategic locations of our residual oil
storage facilities. We supply oil to industrial, commercial and marine customers. We compete with other transloaders in our
logistics activities including, in part, storage and transportation of renewable fuels, gasoline and gasoline blendstocks, crude
oil and the movement of product by alternative means (e.g., pipelines). We also compete with natural gas suppliers and marketers
in our home heating oil, residual oil and propane product lines. Bunkering requires facilities at ports to service vessels. In various
other geographic markets, particularly with respect to unbranded gasoline and distillates markets, we compete with integrated
refiners, merchant refiners and regional marketing companies. Our retail gasoline stations compete with unbranded and branded
retail gasoline stations as well as supermarket and warehouse stores that sell gasoline, and our convenience stores compete with
other convenience store chains, independent convenience stores, supermarkets, drugstores, discount warehouse clubs, motor fuel
stations, mass merchants, fast food operations and other similar retail outlets.
Employees
To carry out our operations, our general partner and certain of our operating subsidiaries employed a total of
approximately 3,860 employees, including 2,540 full‑time employees as of December 31, 2019, of which approximately 105
employees were represented by labor unions under collective bargaining agreements with various expiration dates. We may not
be able to renegotiate the collective bargaining agreements when they expire on satisfactory terms or at all. A failure to do so may
increase our costs. In addition, existing labor agreements may not prevent a future strike or work stoppage, and any work
stoppage could negatively affect our results of operations and financial condition. We believe we have good relations with our
employees.
We have a shared services agreement with Global Petroleum Corp. The services provided by employees shared pursuant
to this agreement do not limit the ability of such employees to provide all services necessary to properly run our businesses.
Please read Part III, Item 13, “Certain Relationships and Related Transactions, and Director Independence—Shared Services
Agreement.”
Title to Properties, Permits and Licenses
We believe we have all of the assets needed, including leases, permits and licenses, to operate our businesses in all
material respects. With respect to any consents, permits or authorizations that have not been obtained, we believe that the failure
to obtain these consents, permits or authorizations will have no material adverse effect on our financial position, results of
operations or cash available for distribution to our unitholders.
We believe we have satisfactory title to all of our assets. Title to property, including certain sites within our GDSO
segment, may be subject to encumbrances, including repurchase rights and use, operating and environmental covenants and
restrictions. We believe that none of these encumbrances will materially detract from the value of our properties or from our
interest in these properties, nor will they materially interfere with the use of these properties in the operation of our businesses.
The name GLOBAL , our Global logos and the name Global Petroleum Corp. are our trademarks. In addition, we have
®
trademarks for our premium fuels and additives: Heating Oil Plus™ and the Heating Oil Plus logo, SubZero and the SubZero
logo, Diesel One and the Diesel One logo, Diesel 1 , the Diesel 1™ logo and the tagline Legacy.Technology.Performance. .
®
®
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®
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™
We also use the following trademarks for our convenience store business: ALLTOWN , ALLTOWN INSIDERS ,
®
™
®
ALLTOWN FRESH and the ALLTOWN FRESH logos, YOUR TOWN.MYTOWN.ALLTOWN! , ALLTOWN MARKET ,
®
CENTRE ST. KITCHEN , Buck Stop , Fast Freddie’s , Mr. Mike’s , Deli Joe’s and the Deli Joe’s logo, Diamond Fuels ,
Xtra and the XtraCafé logo, Xtra Mart and the Xtramart logo, the Honey Farms logo, Honey Money and the Honey Money
logo.
™
®
®
®
®
®
®
®
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®
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®
®
Facilities
We lease office space for our principal executive office in Waltham, Massachusetts. This lease expires on July 31, 2026
with extension options through July 31, 2036. In addition, we lease office space in Branford, Connecticut. This lease expires on
July 31, 2024 with extension options through July 31, 2034.
Environmental
General
Our businesses of supplying refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane
involve a number of activities that are subject to extensive and stringent environmental laws. In addition, these laws are
frequently modified or revised to impose new obligations.
Our operations use a number of petroleum and other products storage and distribution facilities. These facilities include
rail transloading facilities and gasoline stations that we do not own or operate, but at which refined petroleum products, gasoline
blendstocks, renewable fuels, crude oil and propane are stored. We use these facilities through several different contractual
arrangements, including leases and throughput and terminalling services agreements. If facilities with which we contract that are
owned and operated by third parties fail to comply with environmental laws, they could be shut down or their operations could be
compromised, requiring us to incur costs to use alternative facilities.
State, federal, and municipal laws and regulations, including, without limitation, those governing environmental matters
can restrict or impact our business activities in many ways, such as:
·
·
·
·
requiring remedial action to mitigate releases of hydrocarbons, hazardous substances or wastes caused by our
operations or attributable to former operators;
requiring our operations to obtain, maintain and renew permits which can obligate us to incur capital expenditures to
comply with environmental control requirements and which may restrict our operations;
enjoining the operations of facilities found to be noncompliant with applicable laws and regulations; and
inability to renew permits on satisfactory terms and conditions.
Any such failures to comply may also trigger administrative, civil and possibly criminal enforcement measures,
including monetary penalties and remedial requirements. Certain statutes impose strict, joint and several liability for costs
required to clean up and restore sites where hydrocarbons, hazardous substances or wastes have been released or disposed of.
Moreover, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly
caused by the release of hydrocarbons, hazardous substances or other wastes into the environment.
Our operating permits are subject to modification, renewal and revocation. We regularly monitor and review our
operations, procedures and policies for compliance with permits, laws and regulations. Risk of noncompliance, permit
interpretation, permit modification, renewal of permits on less favorable terms, judicial or administrative challenges of permits or
permit revocation are inherent in the operation of our businesses, as it is with other companies engaged in similar businesses.
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The trend in environmental regulation has been to place more restrictions and limitations on activities that may affect the
environment over time. As a result, there can be no assurance as to the amount or timing of future expenditures for environmental
compliance or remediation, and actual future expenditures may be different from the amounts we currently anticipate. We try to
anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing
environmental laws and regulations and minimize the costs of such compliance.
We do not believe that compliance with federal, state or municipal laws, including environmental laws and regulations
will have a material adverse effect on our financial position, results of operations or cash available for distribution to our
unitholders. We can provide no assurance, however, that future events, such as changes in existing laws (including changes in the
interpretation of existing laws), the promulgation of new laws, or the development or discovery of new facts or conditions will not
cause us to incur significant costs or will not have a material adverse effect on our financial position, results of operations or cash
available for distribution to our unitholders.
For additional information concerning certain environmental proceedings, please read Notes 14 and 23 of Notes to
Consolidated Financial Statements.
Hazardous Material Releases and Waste Handling
Our businesses are subject to laws that relate to the release of hazardous substances into the water, air or soils and
require, among other things, measures to control pollution of the environment. For instance, the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended, also known as CERCLA or the Superfund law, and comparable state
laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons who are
considered to be responsible for the release of hazardous substances into the environment. Under the Superfund law, these
persons may be subject to joint and several liability for the costs of cleaning up hazardous substances that have been released into
the environment, for damages to natural resources and for the costs of certain health studies. In the course of our ordinary
operations, we may generate, store or otherwise handle materials and wastes that fall within the Superfund law’s definition of a
hazardous substance and, as a result, we may be jointly and severally liable under the Superfund law for all or part of the costs
required to clean up sites at which those hazardous substances have been released into the environment. Under these laws, we
could be required to remove or remediate previously disposed wastes, including wastes disposed of or released by prior owners or
operators, clean up contaminated property, including groundwater contaminated by prior owners or operators, or make capital
improvements to prevent future contamination.
Our operations generate a variety of wastes, including some hazardous wastes that are subject to the federal Resource
Conservation and Recovery Act, as amended (“RCRA”) and comparable state laws. These regulations impose detailed
requirements for the handling, storage, treatment and disposal of hazardous waste. Our operations also generate solid wastes
which are regulated under state law or the less stringent solid waste requirements of the federal Solid Waste Disposal Act. We
believe that our operations are in substantial compliance with the existing requirements of RCRA, the Solid Waste Disposal Act
and similar state and municipal laws, and the cost involved in complying with these requirements is not material. We also incur
ongoing costs for monitoring groundwater and/or remediation of contamination at several facilities that we operate.
We believe we are in substantial compliance with applicable hazardous material releases and waste handling
requirements related to our operations. We do not believe that compliance with federal, state or municipal hazardous material
releases and waste handling regulations will have a material adverse effect on our financial position, results of operations or cash
available for distribution to our unitholders. However, these and future statutes, regulatory changes or initiatives regarding
hazardous material releases and waste handling could directly and indirectly increase our operating and compliance costs. We
cannot assure that costs incurred to comply with standards and regulations emerging from these and future rulemakings will not
be material to our businesses, financial condition or results of operations.
Above Ground Storage Tanks
Above ground tanks that contain petroleum and other hazardous substances are subject to comprehensive regulation
under environmental and other laws. Generally, these laws require secondary containment systems for tanks
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or that the operators take alternative precautions to ensure that no contamination results from tank leaks or spills and impose
liability for releases from the tanks. We believe we are in substantial compliance with environmental laws and regulations
applicable to above ground storage tanks.
Under the Oil Pollution Act of 1990 (“OPA”) and comparable state laws, responsible parties for a regulated facility from
which oil products so regulated are discharged may be subject to strict, joint and several liability for removal costs and certain
other consequences of an oil spill such as natural resource damages, where the spill is into navigable waters or along shorelines.
Under the authority of the federal Clean Water Act, the EPA imposes specific requirements for Spill Prevention, Control
and Countermeasure plans that are designed to prevent, and minimize the impacts of, releases of oil and other products from
above ground storage tanks. We believe we are in substantial compliance with regulations pursuant to OPA, the Clean Water Act
and similar state laws. We follow the American Petroleum Institute’s inspection, maintenance and repair standard applicable to
our above ground storage tanks.
Underground Storage Tanks
We are required to make financial expenditures to comply with regulations governing underground storage tanks
(“USTs”) which store gasoline or other regulated substances adopted by federal, state and municipal regulatory agencies.
Pursuant to RCRA, the EPA has established a comprehensive regulatory program for the detection, prevention, investigation and
cleanup of leaking USTs. State or local agencies may be delegated the responsibility for implementing the federal program or
developing and implementing equivalent or stricter state or local regulations. We have a comprehensive program in place for
performing routine tank testing and other compliance activities which are intended to promptly detect and investigate any
potential releases. We believe we are in substantial compliance with applicable environmental requirements, including those
applicable to our USTs. Compliance with existing and future environmental laws regulating UST systems of the kind we use may
require significant capital expenditures in the future. These expenditures may include upgrades, modifications, and the
replacement of USTs and related piping to comply with current and future regulatory requirements designed to ensure the
detection, prevention, investigation and remediation of leaks and spills.
Water Discharges
The federal Clean Water Act imposes restrictions regarding the discharge of pollutants, including oil and refined
petroleum products, gasoline blendstocks, renewable fuels and crude oil, into navigable waters. This law and comparable state
laws may require permits for discharging pollutants into state and federal waters and impose substantial liabilities and remedial
obligations for noncompliance. We hold these discharge permits for our facilities, as applicable. Certain waters and wetlands,
known as Waters of the United States, are also subject to the protections and requirements of the Clean Water Act. Considerable
legal uncertainty currently exists surrounding what standard should be used to identify waters of the United States as a result of a
2015 rulemaking expanding the definition of waters of the United States and a 2019 rulemaking that rescinded the 2015 rule.
Litigation regarding the 2019 rulemaking has been filed. This uncertainty and the outcome of these legal challenges may result in
a need for such permits in areas that were not formerly subject to the Clean Water Act, which may delay, limit or increase the
costs of the exploration and production of crude oil and other materials we transport and may also adversely affect shippers who
use our transportation assets. Any resulting restriction of supply could adversely affect our financial position, results of operations
or cash available for distribution to our unitholders.
EPA regulations also may require us to obtain permits to discharge certain storm water runoff. Storm water discharge
permits also may be required by certain states in which we operate. We believe that we hold the required permits and operate in
material compliance with those permits. While we have experienced periodic permit discharge exceedences at some of our
terminals, we do not expect any noncompliance with existing permits and foreseeable new permit requirements to have a material
adverse effect on our financial position, results of operations or cash available for distribution to our unitholders.
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Air Emissions
Under the federal Clean Air Act (the “CAA”) and comparable state and local laws, permits are typically required to emit
regulated air pollutants into the atmosphere above certain thresholds. We believe that we currently hold or have applied for all
necessary air permits and that we are in substantial compliance with applicable air laws and regulations. Although we can give no
assurances, we are aware of no changes to air quality regulations that will have a material adverse effect on our financial
condition, results of operations or cash available for distribution to our unitholders.
Various federal, state and municipal agencies have the authority to prescribe product quality specifications for the
petroleum products and renewable fuels that we sell, largely in an effort to reduce air pollution. Failure to comply with these
regulations can result in substantial penalties. Although we can give no assurances, we believe we are currently in substantial
compliance with these regulations.
Changes in product quality specifications could require us to incur additional handling costs or reduce our throughput
volume. For instance, different product specifications for different markets could require the construction of additional storage.
Also, many states where we sell heating oil have limited the sulfur content of home heating oil.
In addition, the CAA and similar state laws impose requirements on emissions to the air from motor fueling activities in
certain areas of the country, including those that do not meet state or national ambient air quality standards. These laws may
require the installation of vapor recovery systems to control emissions of volatile organic compounds to the air during the motor
fueling process.
In November 2015, the EPA also revised the existing National Ambient Air Quality Standards (“NAAQS”) for
ground‑level ozone, which made the standard more stringent. Nitrogen oxides and volatile organic compounds are recognized as
precursors of ozone, and emissions of those materials are associated with mobile sources and the petroleum industry. A
designation of nonattainment can lead the governing state to issue more stringent limits on existing sources of those precursor
pollutants within the designated nonattainment area. Also, a nonattainment designation may increase the burdens on permitting
new activities in those areas. The EPA completed area designations for the 2015 ozone standards in July 2018. States with areas
designated nonattainment have at least two years from the effective date of the nonattainment designation to submit any required
State Implementation Plan revisions. While we are not able to determine the extent to which this new standard, or the finalized
nonattainment designations, will impact our businesses at this time, it does have the potential to have a material impact on our
operations and cost‑structure.
Climate Change
Federal climate change legislation in the United States appears unlikely in the near‑term. As a result, domestic efforts to
curb greenhouse gas (“GHG”) emissions continue to be led by the EPA’s GHG regulations and the efforts of states. To the extent
that our operations are subject to the EPA’s GHG regulations or regulatory protocol promulgated by states where we operate our
businesses, we may face increased capital and operating costs associated with new or expanded facilities. Significant expansions
of our existing facilities or construction of new facilities may be subject to the CAA’s requirements for review of pollutants
regulated under the Prevention of Significant Deterioration and Title V programs. Some of our facilities and operations are also
subject to the EPA’s Mandatory Reporting of Greenhouse Gases rule, and any further regulation may increase our operational
costs. Some states in which we do business, including New York, have enacted measures requiring regulatory agencies to
consider potential sea level rise in the performance of their regulatory duties.
In May 2016, the EPA finalized New Source Performance Standards (“NSPS”) for methane and volatile organic
compound emissions from certain activities in the oil and gas production sector, not including crude oil or refined product
transportation. The EPA also released new control guidance for reducing volatile organic compound emissions from existing oil
and gas sources in certain ozone non‑attainment areas. However, the EPA announced in April 2017 that it intends to reconsider
certain aspects of the 2016 NSPS and, in June 2017, the EPA issued an administrative stay of key provisions of the rule but was
promptly ordered by the D.C. Circuit to implement the rule. The EPA also proposed 60-day and two-year stays of certain
provisions in June 2017 and published a Notice of Data Availability in November 2017
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seeking comment and providing clarification regarding the agency’s legal authority to stay the rule. In March 2018, the EPA
announced amendments to two narrow provisions of the 2016 NSPS and in October 2018, the EPA proposed broader amendments
to the 2016 NSPS including those related to fugitive emissions requirements and alternative means of emissions limitations
provisions. If the proposed rule is finalized, it will likely be subject to judicial challenge. Collectively, these rules could impose
new compliance costs and additional permitting burdens on upstream oil and gas operations, which could in turn affect the
companies that produce the crude oil that we transport. Currently, however, it is not possible to estimate the likely financial
impact of potential future regulation on our operations.
Under Subpart MM of the Mandatory Greenhouse Gas Reporting Rule (“MRR”), importers and exporters of petroleum
products, including distillates and natural gas liquids, must report the GHG emissions that would result from the complete
combustion of all imported and exported products if such combustion would result in the emission of at least 25,000 metric tons
of carbon dioxide equivalent per year. We currently report under Subpart MM because of the volume of petroleum products we
typically import. Compliance with the MRR does not substantially impact our operations. However, any change in regulations
based on GHG emissions reported in compliance with MRR may limit our ability to import petroleum products or increase our
costs to import such products.
The EPA has also issued Corporate Average Fuel Economy (“CAFE”) standards to regulate emissions of GHGs from
the use of fossil fuels for mobile sources. In 2012, the EPA issued CAFE standards for fleets of 2022-2025 model year vehicles.
In 2016, the National Highway Traffic Safety Administration (“NHTSA”) finalized a rule imposing stricter penalties against
those who exceed CAFE standards. In 2018, the EPA proposed a rule that would amend the 2022-2025 CAFE standards. In 2019,
the EPA and NHTSA jointly finalized a rule to reduce the penalties for violations of CAFE standards and to revoke California’s
authority to set its own fuel economy standards. California and a coalition of other states have filed suit to challenge the 2019
rule. Should stricter standards or penalties standards become effective or should California’s authority to set its own fuel economy
standards be upheld, reductions in emissions of GHGs from the operation of motor vehicles may be required, which may reduce
demand for our products and services.
Overall, there has been a trend towards increased regulation of GHGs and initiatives, both domestically and
internationally, to limit GHG emissions. Future efforts to limit emissions associated with transportation fuels and heating fuels
could reduce the market for, or effect pricing of, our products, and thus adversely impact our businesses. For example, at the 2015
United Nations Framework Convention on Climate Change in Paris, the United States and nearly 200 other nations entered into
an international climate agreement. Although this agreement does not create any binding obligations for nations to limit their
GHG emissions, it does include pledges to voluntarily limit or reduce future emissions. The Paris Agreement became effective in
November 2016. In August 2017, the U.S. State Department officially informed the United Nations of the intent of the U.S. to
withdraw from the agreement, with the earliest possible effective date of withdrawal being November 4, 2020. In addition, it
should be noted that some scientists have concluded that increasing concentrations of GHG in the earth’s atmosphere may
produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and
floods and other climatic events. If any of those effects were to occur, they could have an adverse effect on our assets and
operations.
Activists concerned about the potential effects of climate change have, in certain instances, directed their attention at
sources of funding for energy companies whose businesses are related to the use of fossil fuels. This could make it more difficult
to secure funding for projects related to the use of fossil fuels.
Convenience Store Regulations
Our convenience store operations are subject to extensive governmental laws and regulations that include legal
restrictions on the sale of alcohol, tobacco and lottery products, food labelling, safety and health requirements and public
accessibility, as well as sanitation, environmental, safety and fire standards. State and local regulatory agencies have the authority
to approve, revoke, suspend or deny applications for, and renewals of, permits and licenses. Our operations are also subject to
federal and state laws governing matters such as wage rates, overtime, working conditions and citizenship requirements. At the
federal level, there are proposals under consideration from time to time to increase minimum wage rates and to introduce a system
of mandated health insurance, each of which could adversely affect our results of operations.
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In June 2009, Congress passed the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) which gave the
FDA broad authority to regulate tobacco and nicotine products. Under the FSPTCA, the FDA has enacted numerous regulations
restricting the sale of such products to anyone under the age of 18 years (state laws are permitted to set a higher minimum age);
prohibit the sale of single cigarettes or packs with less than 20 cigarettes; and prohibit the sale or distribution of non‑tobacco
items such as hats and t‑shirts with tobacco brands, names or logos. These governmental actions, as well as national, state and
municipal campaigns to discourage smoking, tax increases, and imposition of regulations restricting the sale of e-cigarettes and
vapor products, have and could result in reduced consumption levels, higher costs which we may not be able to pass on to our
customers, and reduced overall customer traffic. Also, increasing regulations related to and restricting the sale of vapor products
and e-cigarettes may offset some of the gains we have experienced from selling these types of products. These factors could
materially affect the sale of this product mix which in turn could have an adverse effect on our results of operations.
Ethanol Market
The market for ethanol is dependent on several economic incentives and regulatory mandates for blending ethanol into
gasoline, including the availability of federal tax incentives, ethanol use mandates and oxygenate blending requirements. For
instance, the Renewable Fuels Standard (“RFS”) requires that a certain amount of renewable fuels, such as ethanol, be utilized in
transportation fuels, including gasoline, in the United States each year. Additionally, the EPA imposes oxygenate blending
requirements for reformulated gasoline that are best met with ethanol blending. Gasoline marketers may also choose to
discretionally blend ethanol into conventional gasoline for economic reasons. A change or waiver of the RFS mandate or the
reformulated gasoline oxygenate blending requirements could adversely affect the availability and pricing of ethanol. Any change
in the RFS mandate could also result in reduced discretionary blending of ethanol into conventional gasoline.
Environmental Insurance
We maintain insurance which may cover, in whole or in part, certain costs relating to environmental matters associated
with releases of products we store, sell and/or ship. We maintain insurance policies with insurers in amounts and with coverage
and deductibles we believe are reasonable and prudent. These policies may not cover all environmental risks and costs and may
not provide sufficient coverage in the event an environmental claim is made against us.
Security Regulation
Since the September 11, 2001 terrorist attacks on the United States, the U.S. government has issued warnings that energy
infrastructure assets may be future targets of terrorist organizations. These developments have subjected our operations to
increased risks. Increased security measures taken by us as a precaution against possible terrorist attacks have resulted in
increased costs to our businesses. Where required by federal or municipal laws, we have prepared security plans for the storage
and distribution facilities we operate. Terrorist attacks aimed at our facilities and any global and domestic economic repercussions
from terrorist activities could adversely affect our financial condition, results of operations and cash available for distribution to
our unitholders. For instance, terrorist activity could lead to increased volatility in prices for home heating oil, gasoline and other
products we sell.
Insurance carriers are currently required to offer coverage for terrorist activities as a result of the federal Terrorism Risk
Insurance Act of 2002 (“TRIA”). We purchased this coverage with respect to our property and casualty insurance programs,
which resulted in additional insurance premiums. Pursuant to the Terrorism Risk Insurance Program Reauthorization Act of 2015,
TRIA has been extended through December 31, 2020. Although we cannot determine the future availability and cost of insurance
coverage for terrorist acts, we do not expect the availability and cost of such insurance to have a material adverse effect on our
financial condition, results of operations or cash available for distribution to our unitholders.
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Hazardous Materials Transportation
Our operations include the preparation and shipment of some hazardous materials by truck, rail, marine vessel and/or
pipeline. We are subject to regulations promulgated under the Hazardous Materials Transportation Act (and subsequent
amendments) and administered by the U.S. Department of Transportation (“DOT”) under the Federal Highway Administration,
the Federal Railroad Administration, the United States Coast Guard and the Pipeline and Hazardous Materials Safety
Administration (“PHMSA”).
We conduct loading and unloading of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and
propane to and from cargo transports, including tanker trucks, railcars, marine vessels and pipeline. In large part, the cargo
transports are owned and operated by third parties. In addition, we lease a fleet of railcars and charter barges associated with the
shipment of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We conduct ongoing
training programs to help ensure that our operations are in compliance with applicable regulations.
The trend in hazardous material transportation is to increase oversight and regulation of these operations. High-profile
derailments of freight trains carrying hazardous materials, including the tragic events in July 2013 in Lac Mégantic and other
subsequent events, have led federal and state regulators to introduce a number of requirements regulating the transportation of
hazardous materials including crude oil and other products. These regulations address the testing and ensuing designations of
crude oil; the safety of tank cars that are used in transporting crude oil and other flammable or petroleum type liquids by rail,
including a requirement to phase out certain older DOT-111 tank cars; braking standards for certain trains; and new operational
protocols for trains transporting large volumes of flammable liquids, such as routing requirements, speed restrictions and the
provision of information to local government agencies. In July 2016, PHMSA also proposed a new rule that would expand the
applicability of comprehensive oil spill response plans so that any railroad that transports a single train carrying 20 or more
loaded tank cars of liquid petroleum oil in a continuous block or a single train carrying 35 or more loaded tank cars of liquid
petroleum oil throughout the train must have a current, comprehensive, written plan. In February 2019, PHMSA finalized that
proposal. In January 2017, PHMSA issued an Advance Notice of Proposed Rulemaking announcing that it is considering revising
the Hazardous Materials Regulations to establish vapor pressure limits for the transportation of crude oil and potentially all
Class 3 flammable liquid hazardous materials. In addition to action taken or proposed by federal agencies, a number of states have
proposed or enacted laws in recent years that encourage safer rail operations or urge the federal government to enhance
requirements for these operations.
Canadian regulators have also taken measures to assess and address risks from the transport of crude oil by rail.
Transport Canada phased out the use of DOT-111 tank cars in crude oil service as of November 1, 2016. Transport Canada has
also implemented regulations imposing a 40 mile‑per‑hour speed limit on certain trains carrying hazardous materials in highly
populated areas, requiring railways to give municipalities and first responders more information about the hazardous materials
they carry, requiring that approved Emergency Response Assistance Plans be in place prior to transporting certain quantities of
hazardous materials, and requiring railways to carry minimum levels of insurance depending on the quantity of crude oil or
dangerous goods that they transport.
We believe we are in substantial compliance with applicable hazardous materials transportation requirements related to
our operations. We do not believe that compliance with federal, state or municipal hazardous materials transportation regulations
will have a material adverse effect on our financial position, results of operations or cash available for distribution to our
unitholders. However, these and future statutes, regulatory changes or initiatives regarding hazardous material transportation,
could directly and indirectly increase our operation, compliance and transportation costs and lead to shortages in availability of
tank cars. We cannot assure that costs incurred to comply with standards and regulations emerging from these and future
rulemakings will not be material to our businesses, financial condition or results of operations. Furthermore, we can provide no
assurance that future events, such as changes in existing laws (including changes in the interpretation of existing laws), the
promulgation of new laws and regulations, including any voluntary measures by the rail industry, that result in new requirements
for the design, construction or operation of tank cars used to transport crude oil or other products, or, or the development or
discovery of new facts or conditions will not cause us to incur significant costs. Any such requirements would apply to the
industry as a whole.
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Employee Safety
We are subject to the requirements of the Occupational Safety and Health Act (“OSHA”) and comparable state statutes
that regulate the protection of the health and safety of workers. In addition, OSHA’s hazard communication standards require that
information be maintained about hazardous materials used or produced in operations and that this information be provided to
employees, state and local government authorities and citizens. We believe that we are in substantial compliance with the
applicable OSHA requirements.
Item 1A. Risk Factors.
Risks Related to Our Business
We may not have sufficient cash from operations to enable us to pay distributions on our Series A Preferred Units or maintain
distributions on our common units at current levels following establishment of cash reserves and payment of fees and
expenses, including payments to our general partner.
We may not have sufficient available cash each quarter to pay distributions on our Series A Preferred Units and maintain
distributions on our common units at current levels. The amount of cash we can distribute on our units principally depends upon
the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:
·
·
·
·
·
·
·
competition from other companies that sell refined petroleum products, gasoline blendstocks, renewable fuels, crude
oil and propane and convenience store items and sundries;
demand for refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane in the markets
we serve;
absolute price levels, as well as the volatility of prices, of refined petroleum products, gasoline blendstocks,
renewable fuels, RINs, crude oil and propane in both the spot and futures markets;
supply, extreme weather and logistics disruptions;
seasonal variation in temperatures which affects demand for home heating oil and residual oil to the extent that it is
used for space heating;
the level of our operating costs, including payments to our general partner; and
prevailing economic conditions.
In addition, the actual amount of cash we have available for distribution will depend on other factors such as:
·
·
·
·
·
·
the level of capital expenditures we make;
the restrictions contained in our credit agreement and the indentures governing our senior notes, including financial
covenants, borrowing base limitations and advance rates;
distributions paid on our Series A Preferred Units;
our debt service requirements;
the cost of acquisitions;
fluctuations in our working capital needs;
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·
·
our ability to borrow under our credit agreement to make distributions to our unitholders; and
the amount of cash reserves established by our general partner.
The amount of cash we have available for distribution to unitholders depends on our cash flow and does not depend solely on
profitability.
The amount of cash we have available for distribution depends primarily on our cash flow, including borrowings, and
does not depend solely on profitability. Our cash flow will be affected by non‑cash items. As a result, we may make cash
distributions during periods when we record losses and may not make cash distributions during periods when we record net
income.
We may not be able to fully implement or capitalize upon planned growth projects.
We could have a number of organic growth projects that may require the expenditure of significant amounts of capital
individually and in the aggregate. Many of these projects involve numerous regulatory, environmental, commercial and legal
uncertainties beyond our control. As these projects are undertaken, required approvals, permits and licenses may not be obtained,
may be delayed or may be obtained with conditions that materially alter the expected return associated with the underlying
projects. Moreover, revenues associated with these organic growth projects may not increase immediately upon the expenditures
of funds with respect to a particular project and these projects may be completed behind schedule or in excess of budgeted cost.
We may pursue and complete projects in anticipation of market demand that dissipates or market growth that never materializes.
As a result of these uncertainties, the anticipated benefits associated with our capital projects may not be recognized.
We commit substantial resources to pursuing acquisitions and expending capital for growth projects, although there is no
certainty that we will successfully complete any acquisitions or growth projects or receive the economic results we anticipate
from completed acquisitions or growth projects.
We are continuously engaged in discussions with potential sellers and lessors of existing (or suitable for development)
terminalling, storage, logistics and/or marketing assets, including gasoline stations, convenience stores and related businesses.
Our growth largely depends on our ability to make accretive acquisitions and/or accretive development projects. We may be
unable to execute such accretive transactions for a number of reasons, including the following: (1) we are unable to identify
attractive transaction candidates or negotiate acceptable terms; (2) we are unable to obtain financing for such transactions on
economically acceptable terms; or (3) we are outbid by competitors. In addition, we may consummate transactions that at the time
of consummation we believe will be accretive but that ultimately may not be accretive. If any of these events were to occur, our
future growth and ability to increase or maintain distributions on our common units could be limited. We can give no assurance
that our transaction efforts will be successful or that any such efforts will be completed on terms that are favorable to us.
Even if we consummate acquisitions that we believe will be accretive, they may in fact result in no increase or even a
decrease in cash available for distribution to our unitholders. Any acquisition involves potential risks, including:
·
performance from the acquired assets and businesses that is below the forecasts we used in evaluating the
acquisition;
· mistaken assumptions about price, demand, volumes, revenues and costs, including synergies;
·
·
a significant increase in our indebtedness and working capital requirements;
an inability to hire, train or retain qualified personnel to manage and operate our businesses and newly acquired
assets;
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·
the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly
those in new geographic areas or in new lines of business;
· mistaken assumptions about the overall costs of equity or debt;
·
·
·
·
·
the assumption of substantial unknown or unforeseen environmental and other liabilities arising out of the acquired
businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our
acquisition, for which we are not indemnified or for which the indemnity is inadequate;
limitations on rights to indemnity from the seller;
customer or key employee loss from the acquired businesses;
unforeseen difficulties operating in new and existing product areas or new and existing geographic areas; and
diversion of our management’s and employees’ attention from other business concerns.
If any acquisitions we ultimately consummate do not generate expected increases in cash available for distribution to our
unitholders, our ability to increase or maintain distributions on our common units may be reduced.
Our gasoline financial results, with particular impact to our GDSO segment, are seasonal and can be lower in the first and
fourth quarters of the calendar year.
Due to the nature of our businesses and our reliance, in part, on consumer travel and spending patterns, we may
experience more demand for gasoline during the late spring and summer months than during the fall and winter. Travel and
recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for
gasoline that we sell. Therefore, our results of operations in gasoline can be lower in the first and fourth quarters of the calendar
year.
Our heating oil and residual oil financial results are seasonal and can be lower in the second and third quarters of the
calendar year.
Demand for some refined petroleum products, specifically home heating oil and residual oil for space heating purposes,
is generally higher during November through March than during April through October. We obtain a significant portion of these
sales during the winter months. Therefore, our results of operations in heating oil and residual oil for the first and fourth calendar
quarters can be better than for the second and third quarters.
Warmer weather conditions could adversely affect our results of operations and financial condition.
Weather conditions generally have an impact on the demand for both home heating oil and residual oil. Because we
supply distributors whose customers depend on home heating oil and residual oil for space heating purposes during the winter,
warmer‑than‑normal temperatures during the first and fourth calendar quarters can decrease the total volume we sell and the
gross profit realized on those sales. Therefore, our results of operations in heating oil and residual oil for the first and fourth
calendar quarters can be better than for the second and third quarters.
A significant decrease in price or demand for the products we sell or a significant decrease in the pricing of and demand for
our logistics activities could have an adverse effect on our financial condition, results of operations and cash available for
distributions to our unitholders.
A significant decrease in price or demand for the products we sell or a significant decrease in the pricing of and demand
for our logistics activities could reduce our revenues and, therefore, reduce our ability to make distributions to our unitholders or
increase distributions to our common unitholders. Factors that could lead to a decrease in market
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demand for products we sell, including refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane
include:
·
·
·
a recession or other adverse economic conditions or an increase in the market price or of an oversupply of refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane or higher taxes or other
governmental or regulatory actions that increase, directly or indirectly, the cost of gasoline or other refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane;
a shift by consumers to more fuel‑efficient or alternative fuel vehicles, including hybrids, or an increase in fuel
economy of vehicles, whether as a result of technological advances by manufacturers, governmental or regulatory
actions or otherwise; and
conversion from consumption of home heating oil or residual oil to natural gas and utilization of propane and/or
natural gas (instead of heating oil) as primary fuel sources.
Certain of our operating costs and expenses are fixed and do not vary with the volumes we store and distribute. Should
we experience a reduction in our volumes stored, distributed and sold and in our logistics activities, such costs and expenses may
not decrease ratably or at all. As a result, we may experience declines in our margin if these volumes decrease.
Our businesses are influenced by the overall markets for refined petroleum products, gasoline blendstocks, renewable fuels,
crude oil and propane and increases and/or decreases in the prices of these products may adversely impact our financial
condition, results of operations and cash available for distribution to our unitholders and the amount of borrowing available
for working capital under our credit agreement.
Results from our purchasing, storing, terminalling, transporting, selling and blending operations are influenced by prices
for refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane, price volatility and the market for
such products. Prices in the overall markets for these products may affect our financial condition, results of operations and cash
available for distribution to our unitholders. Our margins can be significantly impacted by the forward product pricing curve,
often referred to as the futures market. We typically hedge our exposure to moves in petroleum product and renewable fuel prices
with futures contracts and, to a lesser extent, swaps. In markets where future prices are higher than current prices, referred to as
contango, we may use our storage capacity to improve our margins by storing products we have purchased at lower prices in the
current market for delivery at higher prices in the future. In markets where future prices are lower than current prices, referred to
as backwardation, inventories can depreciate in value and hedging costs are more expensive. For this reason, in these backward
markets, we attempt to reduce our inventories in order to minimize these effects.
When prices for the products we sell rise, some of our customers may have insufficient credit to purchase supply from us
at their historical purchase volumes, and their customers, in turn, may adopt conservation measures which reduce consumption,
thereby reducing demand for product. Furthermore, when prices increase rapidly and dramatically, we may be unable to promptly
pass our additional costs on to our customers, resulting in lower margins which could adversely affect our results of operations.
Higher prices for the products we sell may (1) diminish our access to trade credit support and/or cause it to become more
expensive and (2) decrease the amount of borrowings available for working capital under our credit agreement as a result of total
available commitments, borrowing base limitations and advance rates thereunder.
When prices for the products we sell decline, our exposure to risk of loss in the event of nonperformance by our
customers of our forward contracts may be increased as they and/or their customers may breach their contracts and purchase
products we sell at the then lower market price from a competitor.
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We have contractual obligations for certain transportation assets such as railcars, barges and pipelines.
A decline in demand for (i) the products we sell or (ii) our logistics activities, could result in a decrease in the utilization
of our transportation assets, which could negatively impact our financial condition, results of operations and cash available for
distribution to our unitholders.
The condition of credit markets may adversely affect our liquidity.
In the past, world financial markets experienced a severe reduction in the availability of credit. Possible negative impacts
in the future could include a decrease in the availability of borrowings under our credit agreement, increased counterparty credit
risk on our derivatives contracts and our contractual counterparties requiring us to provide collateral. In addition, we could
experience a tightening of trade credit from our suppliers.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.
As of December 31, 2019, our total debt, including amounts outstanding under our credit agreement and senior notes,
was approximately $1.2 billion. We have the ability to incur additional debt, including the capacity to borrow up to $1.3 billion
under our credit agreement, subject to limitations in our credit agreement. Our level of indebtedness could have important
consequences to us, including the following:
·
·
our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or
other purposes may be impaired or such financing may not be available on favorable terms;
covenants contained in our existing and future credit and debt arrangements will require us to meet financial tests
that may affect our flexibility in planning for and reacting to changes in our businesses, including possible
acquisition opportunities;
· we will need a substantial portion of our cash flow to make principal and interest payments on our indebtedness,
reducing the funds that would otherwise be available for operations, future business opportunities and distributions
to unitholders;
·
·
our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a
downturn in our businesses or the economy generally; and
our debt level may limit our flexibility in responding to changing businesses and economic conditions.
Our ability to service our indebtedness depends upon, among other things, our financial and operating performance,
which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are
beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to
take actions, such as reducing or eliminating distributions, reducing or delaying our business activities, acquisitions, investments
and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital or
bankruptcy protection. We may not be able to effect any of these remedies on satisfactory terms or at all.
A significant increase in interest rates could adversely affect our ability to service our indebtedness.
The interest rates on our credit agreement are variable; therefore, we have exposure to movements in interest rates. A
significant increase in interest rates could adversely affect our ability to service our indebtedness. The increased cost could make
the financing of our business activities more expensive. These added expenses could have an adverse effect on our financial
condition, results of operations and cash available for distribution to our unitholders.
On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or
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compelling banks to submit LIBOR rates after 2021. Under our credit agreement, if a comparable or successor rate to LIBOR is
approved by Bank of America, N.A., in its capacity as administrative agent under our credit agreement, the approved rate will be
applied in a manner consistent with market practice. To the extent market practice is not administratively feasible for the
administrative agent, the approved rate will be applied in a manner otherwise reasonably determined by the administrative agent.
We currently do not expect the transition from LIBOR to have a material impact on us. However, if clear market standards and
replacement methodologies have not developed as of the time LIBOR becomes unavailable, we may have difficulty reaching
agreement on acceptable replacement rates under our credit agreement. In the event that we do not reach agreement on an
acceptable replacement rate for LIBOR, outstanding borrowings under the credit agreement denominated in U.S. dollars would
revert to a floating rate equal to the base rate (which is equal to the greatest of the administrative agent’s prime rate, the Federal
Funds effective rate plus 0.50%, or 1-month LIBOR plus 1.00%) plus the applicable margin applicable to the alternative base rate
which is currently equal to between 0.75% and 1.75%. If we are unable to negotiate replacement rates on favorable terms, it could
have a material adverse effect on our financial condition, results of operations and cash distributions to unitholders. For more
information about the interest rates under our senior secured credit agreement, please read Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit
Agreement.”
We may not be able to obtain funding on acceptable terms or obtain additional requested funding in excess of total
commitments under our credit agreement, which could have a material adverse effect on our financial condition, results of
operations and cash available for distribution to our unitholders.
In the past, global financial markets and economic conditions were disrupted and volatile. The debt and equity capital
markets were exceedingly distressed. These issues, along with significant write‑offs in the financial services sector, the re‑pricing
of credit risk and the economic conditions, had made and, along with any other potential future economic or market uncertainties,
could make it difficult to obtain funding. Activists concerned about the potential effects of climate change have, in certain
instances, directed their attention at sources of funding for energy companies whose businesses are related to the use of fossil
fuels. This could make it more difficult to secure funding for projects.
As a result, the cost of raising money in the debt and equity capital markets could increase while the availability of funds
from those markets could diminish. The cost of obtaining money from the credit markets could increase as many lenders and
institutional investors increase interest rates, enact tighter lending standards and reduce and, in some cases, cease to provide
funding to borrowers.
In addition, we may be unable to obtain adequate funding under our credit agreement because (i) one or more of our
lenders may be unable to meet its funding obligations or (ii) our borrowing base under our credit agreement, as redetermined from
time to time, may decrease as a result of price fluctuations, counterparty risk, advance rates and borrowing base limitations and
customer nonpayment or nonperformance.
Due to these factors, we cannot be certain that funding will be available if needed and to the extent required or requested
on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, we may be unable to
maintain our businesses as currently conducted, enhance our existing businesses, complete acquisitions or otherwise take
advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our
financial condition, results of operations and cash available for distribution to our unitholders.
Operating and financial restrictions and covenants in our credit agreement and the indentures governing our senior notes and
borrowing base requirements in our credit agreement may restrict our business and financing activities.
The operating and financial restrictions and covenants in our credit agreement and the indentures governing our senior
notes and any future financing agreements could restrict our ability to finance future operations or capital needs or to engage,
expand or pursue our business activities. For example, our credit agreement restricts our ability to:
·
grant liens;
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· make certain loans or investments;
·
incur additional indebtedness or guarantee other indebtedness;
· make any material change to the nature of our businesses or undergo a fundamental change;
· make any material dispositions;
·
·
acquire another company;
enter into a merger, consolidation, sale-leaseback transaction or purchase of assets;
· make distributions if any potential default or event of default occurs; or
· modify borrowing base components and advance rates.
In addition, the indentures governing our senior notes limit our ability to, among other things:
·
incur additional indebtedness;
· make distributions to equity owners;
· make certain investments;
·
·
·
·
restrict distributions by our subsidiaries;
create liens;
enter into sale‑leaseback transactions;
sell assets; or
· merge with other entities.
Our ability to comply with the covenants and restrictions contained in our credit agreement and indentures may be
affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other
economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the restrictions,
covenants, ratios or tests in our credit agreement or indentures, a significant portion of our indebtedness may become immediately
due and payable, and our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to
obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our credit agreement are secured
by substantially all of our assets, and if we are unable to repay our indebtedness under our credit agreement, the lenders could
seek to foreclose on such assets.
Restrictions in our credit agreement and indentures limit our ability to pay distributions upon the occurrence of certain events.
Our credit agreement and indentures limit our ability to pay distributions upon the occurrence of certain events. For
example, each of our credit agreement and the indentures limits our ability to pay distributions upon the occurrence of the
following events, among others:
·
failure to pay any principal, interest, fees or other amounts when due;
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·
·
failure to perform or otherwise comply with the covenants in the credit agreement, the indentures or in other loan
documents to which we are a borrower; and
a bankruptcy or insolvency event involving us, our general partner or any of our subsidiaries.
Any subsequent refinancing of our current debt or any new debt could have similar restrictions. For more information
regarding our credit agreement and indentures, please read Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreement” and Note 8 of Notes to Consolidated
Financial Statements.
We can borrow money under our credit agreement to pay distributions, which would reduce the amount of credit available to
operate our businesses.
Our partnership agreement allows us to borrow under our credit agreement to pay distributions. Accordingly, we can
make distributions on our units even though cash generated by our operations may not be sufficient to pay such distributions. For
more information, please read Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Liquidity and Capital Resources” and Note 8 of Notes to Consolidated Financial Statements.
The enactment of derivatives legislation could have an adverse effect on our ability to use derivative instruments to reduce the
effect of commodity price, interest rate and other risks associated with our businesses.
On July 21, 2010, new comprehensive financial reform legislation, known as the Dodd‑Frank Wall Street Reform and
Consumer Protection Act (the “Act”), was enacted that establishes federal oversight and regulation of the over‑the‑counter
derivatives market and entities, such as us, that participate in that market. The Act requires the Commodities Futures Trading
Commission (“CFTC”), the SEC and other regulators to promulgate rules and regulations implementing the new legislation.
Although the CFTC has finalized certain regulations, others remain to be finalized or implemented and it is not possible at this
time to predict when this will be accomplished.
In January 2020, the CFTC proposed new rules that would place limits on positions in certain core futures and
equivalent swaps contracts for, or linked to, certain physical commodities, subject to exceptions for certain bona fide hedging
transactions. As these new position limit rules are not yet final, the impact of those provisions on us is uncertain at this time.
The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing and exchange
trading. To the extent we engage in such transactions or transactions that become subject to such rules in the future, we will be
required to comply or take steps to qualify for an exemption to such requirements. Although we expect to qualify for the end‑user
exception to the mandatory clearing requirements for swaps entered to hedge our commercial risks, the application of the
mandatory clearing and trade execution requirements to other market participants, such as swap dealers, may change the cost and
availability of the swaps that we use for hedging. If our swaps do not qualify for the commercial end‑user exception, or the cost
of entering into uncleared swaps becomes prohibitive, we may be required to clear such transactions. The ultimate effect of the
rules and any additional regulations on our businesses is uncertain at this time.
In addition, the Act requires that regulators establish margin rules for uncleared swaps. Banking regulators and the
CFTC have adopted final rules establishing minimum margin requirements for uncleared swaps. Although we expect to qualify
for the end‑user exception from such margin requirements for swaps entered into to hedge our commercial risks, the application
of such requirements to other market participants, such as swap dealers, may change the cost and availability of the swaps that we
use for hedging. If any of our swaps do not qualify for the commercial end‑user exception, posting of initial or variation margin
could impact our liquidity and reduce cash available for capital expenditures, therefore reducing our ability to execute hedges to
reduce risk and protect cash flows.
The full impact of the Act and related regulatory requirements upon our businesses will not be known until all of the
related regulations are implemented. The Act and any new regulations could significantly increase the cost of
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derivative contracts (including from swap recordkeeping and reporting requirements and through requirements to post collateral
which could adversely affect our available liquidity), materially alter the terms of derivative contracts, reduce the availability of
some derivatives to protect against risks we encounter and reduce our ability to monetize or restructure our existing derivative
contracts. If we reduce our use of derivatives as a result of the Act and regulations, our results of operations may become more
volatile and our cash flows may be less predictable, which could adversely affect our ability to plan for and fund capital
expenditures. Any of these consequences could have material adverse effect on our financial condition, results of operations and
cash available for distributions to our unitholders.
In addition, the European Union and other non‑U.S. jurisdictions are implementing regulations with respect to the
derivatives market. To the extent we transact with counterparties in foreign jurisdictions, we may become subject to such
regulations.
Our risk management policies cannot eliminate all commodity risk, basis risk or the impact of unfavorable market conditions,
each of which can adversely affect our financial condition, results of operations and cash available for distribution to our
unitholders. In addition, any noncompliance with our risk management policies could result in significant financial losses.
While our hedging policies are designed to minimize commodity risk, some degree of exposure to unforeseen
fluctuations in market conditions remains. For example, we change our hedged position daily in response to movements in our
inventory. If we overestimate or underestimate our sales from inventory, we may be unhedged for the amount of the overestimate
or underestimate. Also, significant increases in the costs of the products we sell can materially increase our costs to carry
inventory. We use our credit facility as our primary source of financing to carry inventory and may be limited to the amounts we
can borrow to carry inventory.
Basis risk is the inherent market price risk created when a commodity of certain grade or location is purchased, sold or
exchanged as compared to a purchase, sale or exchange of a like commodity at a different time or place. Transportation costs and
timing differentials are components of basis risk. For example, we use the NYMEX to hedge our commodity risk with respect to
pricing of energy products traded on the NYMEX. Physical deliveries under NYMEX contracts are made in New York Harbor.
To the extent we take deliveries in other ports, such as Boston Harbor, we may have basis risk. In a backward market (when
prices for future deliveries are lower than current prices), basis risk is created with respect to timing. In these instances, physical
inventory generally loses value as basis declines over time. Basis risk cannot be entirely eliminated, and basis exposure,
particularly in backward or other adverse market conditions, can adversely affect our financial condition, results of operations and
cash available for distribution to our unitholders.
We monitor processes and procedures to prevent unauthorized trading and to maintain substantial balance between
purchases and sales or future delivery obligations. We can provide no assurance, however, that these steps will detect and/or
prevent all violations of such risk management policies and procedures, particularly if deception or other intentional misconduct
is involved.
We are exposed to trade credit risk and risk associated with our trade credit support in the ordinary course of our business
activities.
We are exposed to risks of loss in the event of nonperformance by our customers, by counterparties of our forward and
futures contracts, options and swap agreements and by our suppliers. Some of our customers, counterparties and suppliers may be
highly leveraged and subject to their own operating and regulatory risks. The tightening of credit in the financial markets may
make it more difficult for customers and counterparties to obtain financing and, depending on the degree to which it occurs, there
may be a material increase in the nonpayment and nonperformance of our customers and counterparties. Even if our credit review
and analysis mechanisms work properly, we may experience financial losses in our dealings with other parties. Any increase in
the nonpayment or nonperformance by our customers and/or counterparties and the nonperformance by our suppliers could
reduce our ability to make distributions to our unitholders.
Additionally, our access to trade credit support could diminish and/or become more expensive. Our ability to continue to
receive sufficient trade credit on commercially acceptable terms could be adversely affected by fluctuations
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in prices of petroleum products, renewable fuels and other products we sell or disruptions in the credit markets or for any other
reason. Any of these events could adversely affect our financial condition, results of operations and cash available for distribution
to our unitholders.
We are exposed to performance risk in our supply chain.
We rely upon our suppliers to timely produce the volumes and types of refined petroleum products, gasoline
blendstocks, renewable fuels, crude oil and propane for which they contract with us. In the event one or more of our suppliers
does not perform in accordance with its contractual obligations, we may be required to purchase product on the open market to
satisfy forward contracts we have entered into with our customers in reliance upon such supply arrangements. We may purchase
refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane from a variety of suppliers under term
contracts and on the spot market. In times of extreme market demand, we may be unable to satisfy our supply requirements.
Furthermore, a portion of our supply comes from other countries, which could be disrupted by political events. In the event such
supply becomes scarce, whether as a result of political events, natural disaster, logistical issues associated with delivery schedules
or otherwise, we may not be able to satisfy our supply requirements. If any of these events were to occur, we may be required to
pay more for product that we purchase on the open market, which could result in financial losses and adversely affect our
financial condition, results of operations and cash available for distribution to our unitholders.
Historical prices for certain products we sell have been volatile and significant changes in such prices in the future may
adversely affect our financial condition, results of operations and cash available for distribution to our unitholders.
Historical prices for certain products we sell have been volatile. General political conditions, acts of war, terrorism and
instability in oil producing regions, particularly in the United States, Canada, Middle East, Russia, Africa and South America,
could significantly impact crude oil supplies and crude oil and refined petroleum product costs. Significant increases and
volatility in wholesale gasoline costs could result in significant increases in the retail price of motor fuel products and in lower
margins per gallon. Increases in the retail price of motor fuel products could impact consumer demand for motor fuel. This
volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our operating results
and financial condition. Dramatic increases in crude oil prices squeeze fuel margins because fuel costs typically increase faster
than these increased costs can be passed along to customers. Higher fuel prices trigger higher credit card expenses, because credit
card fees are calculated as a percentage of the transaction amount, not as a percentage of gallons sold. A significant change in any
of these factors could materially impact our customers’ needs, motor fuel gallon volumes, gross profit and overall customer
traffic, which in turn could have a material adverse effect on our financial condition, results of operations and cash available for
distribution to our unitholders.
Our gasoline sales could be significantly reduced by a reduction in demand due to higher prices and to new technologies and
alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel‑‑powered motor vehicles.
Technological advances and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other
alternative fuel‑powered motor vehicles, may adversely affect the demand for gasoline. We could face additional competition
from alternative energy sources as a result of future government‑mandated controls or regulations which promote the use of
alternative fuel sources. A number of new legal incentives and regulatory requirements, and executive initiatives, including the
Clean Power Plan and various government subsidies including the extension of certain tax credits for renewable energy, have
made these alternative forms of energy more competitive. Changing consumer preferences or driving habits could lead to new
forms of fueling destinations or potentially fewer customer visits to our sites, resulting in a decrease in gasoline sales and/or sales
of food, sundries and other on-site services. Any of these outcomes could negatively affect our financial condition, results of
operations and cash available for distribution to our unitholders. In addition, higher prices could reduce the demand for gasoline
and adversely impact our gasoline sales. A reduction in gasoline sales could have an adverse effect on our financial condition,
results of operations and cash available for distribution to our unitholders.
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Energy efficiency, higher prices, new technology and alternative fuels could reduce demand for our products.
Higher prices and new technologies and alternative fuel sources, such as electric, hybrid or battery powered motor
vehicles, could reduce the demand for transportation fuels and adversely impact our sales of transportation fuels. A reduction in
sales of transportation fuels could have an adverse effect on our financial condition, results of operations and cash available for
distribution to our unitholders. In addition, increased conservation and technological advances have adversely affected the
demand for home heating oil and residual oil. Consumption of residual oil has steadily declined over the last three decades. We
could face additional competition from alternative energy sources as a result of future government‑mandated controls or
regulations further promoting the use of cleaner fuels. End users who are dual‑fuel users have the ability to switch between
residual oil and natural gas. Other end users may elect to convert to natural gas. During a period of increasing residual oil prices
relative to the prices of natural gas, dual‑fuel customers may switch and other end users may convert to natural gas. During
periods of increasing home heating oil prices relative to the price of natural gas, residential users of home heating oil may also
convert to natural gas. As described above, such switching or conversion could have an adverse effect on our financial condition,
results of operations and cash available for distribution to our unitholders.
Erosion of the value of major gasoline brands could adversely affect our gasoline sales and customer traffic.
As a significant number of our retail gasoline stations and convenience stores are branded utilizing major gasoline
brands, they may be dependent, in part, upon the continuing favorable reputation of such brands. Erosion of the value of major
gasoline brands could have a negative impact on our gasoline sales, which in turn may cause our operations to be less profitable.
We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics activities in
transporting the products we sell. Implementation of regulations and directives related to these aforementioned services as
well as disruption in any of these transportation services could have an adverse effect on our financial condition, results of
operations and cash available for distribution to our unitholders.
Hurricanes, flooding and other severe weather conditions could cause a disruption in the transportation services we
depend upon and could affect the flow of service. In addition, accidents, labor disputes between providers and their employees
and labor renegotiations, including strikes, lockouts or a work stoppage, shortage of railcars, trucks and barges, mechanical
difficulties or bottlenecks and disruptions in transportation logistics could also disrupt our business operations. These events
could result in service disruptions and increased costs which could also adversely affect our financial condition, results of
operations and cash available for distribution to our unitholders. Other disruptions, such as those due to an act of terrorism or war,
could also adversely affect our businesses.
Changes in government usage mandates and tax credits could adversely affect the availability and pricing of ethanol and
renewable fuels, which could negatively impact our sales.
The EPA has implemented a RFS pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security
Act of 2007. The RFS program seeks to promote the incorporation of renewable fuels in the nation’s fuel supply and, to that end,
sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into transportation fuels consumed in
the United States. A RIN is assigned to each gallon of renewable fuel produced in or imported into the United States.
We are exposed to the volatility in the market price of RINs. We cannot predict the future prices of RINs. RIN prices are
dependent upon a variety of factors, including EPA regulations related to the amount of RINs required and the total amounts that
can be generated, the availability of RINs for purchase, the price at which RINs can be purchased, and levels of transportation
fuels produced, all of which can vary significantly from quarter to quarter. If sufficient RINs are unavailable for purchase or if we
have to pay a significantly higher price for RINs, or if we are otherwise unable to meet the EPA’s RFS mandates, our results of
operations and cash flows could be adversely affected.
Future demand for ethanol will be largely dependent upon the economic incentives to blend based upon the relative
value of gasoline and ethanol, taking into consideration the EPA’s regulations on the RFS program and
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oxygenate blending requirements. A reduction or waiver of the RFS mandate or oxygenate blending requirements could adversely
affect the availability and pricing of ethanol, which in turn could adversely affect our future gasoline and ethanol sales. In
addition, changes in blending requirements or broadening the definition of what constitutes a renewable fuel could affect the price
of RINs which could impact the magnitude of the mark‑to‑market liability recorded for the deficiency, if any, in our RIN position
relative to our RVO at a point in time.
We may not be able to obtain state fund or insurance reimbursement of our environmental remediation costs.
Where releases of products, including, without limitation, refined petroleum products, gasoline blendstocks, renewable
fuels, crude oil and propane have occurred, federal and state laws and regulations require that contamination caused by such
releases be assessed and remediated to meet applicable standards. Our obligation to remediate this type of contamination varies,
depending upon applicable laws and regulations and the extent of, and the facts relating to, the release. A portion of the
remediation costs for certain products may be recoverable from the reimbursement fund of the applicable state and/or from third
party insurance after any deductible or self-insured retention has been met, but there are no assurances that such reimbursement
funds or insurance proceeds will be available to us.
Future consumer or other litigation could adversely affect our financial condition and results of operations.
Our retail gasoline and convenience store operations are characterized by a high volume of customer traffic and by
transactions involving an array of products.
These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies
operating in many other industries. Consequently, we may become a party to individual personal injury or products liability and
other legal actions in the ordinary course of our retail gasoline and convenience store business. Any such action could adversely
affect our financial condition and results of operations. Additionally, we are occasionally exposed to industry‑wide or class action
claims arising from the products we carry or industry‑specific business practices. Our defense costs and any resulting damage
awards or settlement amounts may not be fully covered by our insurance policies. An unfavorable outcome or settlement of one
or more of these lawsuits could have a material adverse effect on our financial condition, results of operations and cash available
for distributions.
We may incur costs or liabilities as a result of litigation or adverse publicity resulting from concerns over food quality, health
or other issues that could cause customers to avoid our convenience stores.
We may be the subject of complaints or litigation arising from food-related illness or injury in general which could have
a negative impact on our businesses. Additionally, negative publicity, regardless of whether the allegations are valid, concerning
food quality, food safety or other health concerns, employee relations or other matters related to our food preparation operations
may materially adversely affect demand for our offerings and could result in a decrease in customer traffic to our convenience
stores.
We depend upon a small number of suppliers for a substantial portion of our convenience store merchandise inventory. A
disruption in supply or an unexpected change in our relationships with our principal merchandise suppliers could have an
adverse effect on our convenience store results of operations.
We purchase convenience store merchandise inventory from a small number of suppliers for our directly operated
convenience stores. A change of merchandise suppliers, a disruption in supply or a significant change in our relationships with
our principal merchandise suppliers could have an adverse effect on our financial condition, results of operations and cash
available for distribution to our unitholders.
Governmental action and campaigns to discourage smoking may have a material adverse effect on our revenues and gross
profit.
Congress has given the FDA broad authority to regulate tobacco and nicotine products, and the FDA and states have
enacted and are pursuing enaction of numerous regulations restricting the sale of such products. These
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governmental actions, as well as national, state and municipal campaigns to discourage smoking, tax increases, and imposition of
regulations restricting the sale of e-cigarettes and vapor products, have and could result in reduced consumption levels, higher
costs which we may not be able to pass on to our customers, and reduced overall customer traffic. Also, increasing regulations
related to and restricting the sale of vapor products and e-cigarettes may offset some of the gains we have experienced from
selling these types of products. These factors could materially affect the sale of this product mix which in turn could have
an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.
Our results can be adversely affected by unforeseen events, such as adverse weather, natural disasters, terrorism, pandemics,
or other catastrophic events which could have an adverse effect on our financial condition, results of operations, and cash
available for distributions to our unitholders.
Global and national health concerns, such as the outbreak of a pandemic or contagious disease like the recent
coronavirus, may adversely affect us by reducing demand for our products. Such a health concern could result in people traveling
less and avoiding public spaces, such as convenience stores and other locales where food and sundries are sold, either due to self-
imposed or government-mandated restrictions to halt the spread of disease, thereby resulting in a decrease in the demand for our
products, including gasoline and other refined petroleum products, and a decrease in sales of food, sundries and other on-site
services. Such an event may impair our suppliers’ ability to provide the volumes and types of product and goods we sell. A
disease outbreak could affect the health of our workforce or result in travel restrictions, in either case rendering employees unable
to work or travel. While these factors and the impact of these factors are difficult to predict, any one or more of them could
disrupt our business as we may be unable to continue business operations in a continuous manner consistent with the level and
extent of business activities prior to the occurrence of an unexpected event or events, lower our revenues, increase our costs, or
reduce our cash available for distribution to our unitholders.
We face intense competition in our purchasing, selling, gathering, blending, terminalling, transporting, storage and logistics
activities. Competition from other providers of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil
and propane that are able to supply our customers with those products and services at a lower price and have capital resources
many times greater than ours could reduce our ability to make distributions to our unitholders.
We are subject to competition from distributors and suppliers of refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane that may be able to supply our customers with the same or comparable products and
gathering, blending, terminalling, transporting and storage services and logistics on a more competitive basis. We compete with
terminal companies, major integrated oil companies and their marketing affiliates, wholesalers, producers and independent
marketers of varying sizes, financial resources and experience. In our Northeast market, we compete in various product lines and
for all customers of those various products lines. In the residual oil markets, however, where product is heated when stored and
cannot be delivered long distances, we face less competition because of the strategic locations of our residual oil storage facilities.
We compete with other transloaders in our logistics activities. We also compete with natural gas suppliers and marketers in our
home heating oil, residual oil and propane product lines. Bunkering requires facilities at ports to service vessels, and we compete
with other providers of bunker fuels in those ports. In various other geographic markets, particularly the unbranded gasoline and
distillates markets, we compete with integrated refiners, merchant refiners and regional marketing companies. Our retail gasoline
stations compete with unbranded and branded retail gas stations as well as supermarket and warehouse stores that sell gasoline.
Some of our competitors are substantially larger than us, have greater financial resources and control greater supplies of
refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane than we do. If we are unable to compete
effectively, we may lose existing customers or fail to acquire new customers, which could have a material adverse effect on our
financial condition, results of operations and cash available for distribution to our unitholders. For example, if a competitor
attempts to increase market share by reducing prices, our operating results and cash available for distribution to our unitholders
could be adversely affected. We may not be able to compete successfully with these companies, and our ability to compete could
be harmed by factors including price competition and the availability of alternative and less expensive fuels.
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New entrants or increased competition in the convenience store industry could result in reduced gross profits.
We compete with numerous other convenience store chains, independent convenience stores, supermarkets, drugstores,
discount warehouse clubs, motor fuel service stations, mass merchants, fast food operations, other locales providing food services
and other similar retail outlets. Several non-traditional retailers, including supermarkets and club stores, compete directly with
convenience stores.
We may not be able to renew our leases or our agreements for dedicated storage when they expire.
The bulk terminals we own or lease or at which we maintain dedicated storage facilities play a key role in moving
product to our customers. As of December 31, 2019, we owned, operated and maintained dedicated storage facilities at 18 bulk
terminals, leased the entirety of one bulk terminal that we operated exclusively for our businesses, and maintained dedicated
storage at five facilities at which we have terminalling agreements. The lease and terminalling agreements are subject to
expiration through 2020 and 2023, respectively. If these lease and terminalling agreements are not renewed or we are unable to
renew them at rates and on terms and conditions satisfactory us, it could have an adverse effect on our financial condition, results
of operations and cash available for distribution to our unitholders.
We may not be able to lease sites we own or lease and/or sub‑‑lease sites we lease with respect to the sale of gasoline and/or
related activities on favorable terms and any such failure could adversely affect our financial condition, results of operations
and cash available for distribution to our unitholders.
If we are unable to obtain tenants on favorable terms for sites we own or lease, the lease payments we receive may not
be adequate to cover our rent expense for leased sites and/or may not be adequate to cover costs associated with ownership of that
site. We may lease certain sites where the rent expense we pay is more than the lease payments we collect. We cannot provide
any assurance that our gross margin from the sale of transportation fuels and related convenience store items at sites will be
adequate to offset unfavorable lease terms. The occurrence of these events could adversely affect our financial condition, results
of operations and cash available for distribution to our unitholders.
Some of our sales are generated pursuant to contracts that must be renegotiated or replaced periodically. If we are unable to
successfully renegotiate or replace these contracts, our financial condition, results of operations and cash available for
distribution to our unitholders could be adversely affected.
Most of our arrangements with our customers are renegotiated or replaced periodically. As these contracts expire, they
must be renegotiated or replaced. We may be unable to renegotiate or replace these contracts when they expire, and the terms of
any renegotiated contracts may not be as favorable as the contracts they replace. Whether these contracts are successfully
renegotiated or replaced is often subject to factors beyond our control. Such factors include fluctuations in refined petroleum
products, gasoline blendstocks, renewable fuels, crude oil and propane prices, counterparty’s ability to pay for or accept
contracted volumes and a competitive marketplace for the services offered by us. If we cannot successfully renegotiate or replace
our contracts or if we renegotiate or replace them on less favorable terms, sales from these arrangements could decline, and our
financial condition, results of operations and cash available for distribution to our unitholders could be adversely affected.
Due to our lack of asset and geographic diversification, adverse developments in the terminals we use or in our operating
areas would reduce our ability to make distributions to our unitholders.
We rely primarily on sales generated from products distributed from terminals we own or control or to which we have
access. Furthermore, the majority of those assets and operations are located in the Northeast. Due to our lack of diversification in
asset type and location, an adverse development in these businesses or areas, including adverse developments due to catastrophic
events or weather and corresponding decreases in demand for refined petroleum products, gasoline blendstocks, renewable fuels,
crude oil and propane, could have a significantly greater impact on our results of operations and cash available for distribution to
our unitholders than if we maintained more diverse assets and locations.
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Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured.
We are not fully insured against all risks incident to our businesses. Our operations are subject to operational hazards
and unforeseen interruptions such as natural disasters, weather, accidents, fires, explosions, hazardous materials releases,
mechanical failures, disruptions in supply infrastructure or logistics and other events beyond our control. If any of these events
were to occur, we could incur substantial losses because of personal injury or loss of life, severe damage to and destruction of
property and equipment, and pollution or other environmental damage resulting in curtailment or suspension of our related
operations.
We store gasoline and gasoline blendstocks, renewable fuels, crude oil and propane in underground and above ground
storage tanks. Our operations are also subject to significant hazards and risks inherent in storing such products. These hazards and
risks include fires, explosions, spills, discharges and other releases, any of which could result in distribution difficulties and
disruptions, environmental pollution, governmentally‑imposed fines or clean‑up obligations, personal injury or wrongful death
claims and other damage to our properties and the properties of others.
Furthermore, we may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates. As
a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate
further. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we
were to incur a significant liability for which we are not fully insured, it could have a material adverse effect on our financial
condition, results of operations and cash available for distribution to unitholders.
New, stricter environmental laws and other industry-related regulations or environmental litigation could significantly impact
our operations and/or increase our costs, which could adversely affect our results of operations and financial condition.
Our operations are subject to federal, state and municipal laws and regulations regulating, among other matters, logistics
activities, product quality specifications and other environmental matters. The trend in environmental regulation has been towards
more restrictions and limitations on activities that may affect the environment over time. Our businesses may be adversely
affected by increased costs and liabilities resulting from such stricter laws and regulations. We try to anticipate future regulatory
requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and
regulations and to minimize the costs of such compliance. Risks related to our environmental permits, including the risk of
noncompliance, permit interpretation, permit modification, renewal of permits on less favorable terms, judicial or administrative
challenges to permits by citizens groups or federal, state or municipal entities or permit revocation are inherent in the operation of
our businesses as it is with other companies engaged in similar businesses. We may not be able to renew the permits necessary for
our operations, or future permits and renewals of permits may contain terms and conditions that limit our operations or result in
additional compliance costs.
In recent years, the transport of gasoline, distillates, crude oil and ethanol has become subject to additional regulation.
The establishment of more stringent design or construction standards, or other requirements for railroad tank cars that are used to
transport gasoline, distillates, crude oil and ethanol may lead to shortages of compliant railcars available to transport these
products, which could adversely affect our businesses. Likewise, in recent years, efforts have commenced to seek to use federal,
state and municipal laws to contest issuance of permits, contest renewal of permits and restrict the types of railroad tanks cars that
can be used to deliver products, including, without limitation, gasoline, distillates, crude oil and ethanol to bulk storage terminals.
Were such laws to come into effect and were they to survive appeals and judicial review, they would potentially expose our
operations to duplicative and possibly inconsistent regulation.
There can be no assurances as to the timing and type of such changes in existing laws or the promulgation of new laws
or the amount of any required expenditures associated therewith. Climate change continues to attract considerable public and
scientific attention. In recent years environmental interest groups have filed suit against companies in the energy industry related
to climate change. Should such suits succeed, we could face additional compliance costs or litigation risks.
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Our terminalling operations are subject to federal, state and municipal laws and regulations relating to environmental
protection and operational safety that could require us to incur substantial costs.
The risk of substantial environmental costs and liabilities is inherent in terminal operations, and we may incur
substantial environmental costs and liabilities. Our terminalling operations involving the receipt, storage and delivery of refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane are subject to stringent federal, state and
municipal laws and regulations governing the discharge of materials into the environment, or otherwise relating to the protection
of the environment, operational safety and related matters. Compliance with these laws and regulations increases our overall cost
of business, including our capital costs to maintain and upgrade equipment and facilities. We utilize a number of terminals that
are owned and operated by third parties who are also subject to these stringent federal, state and municipal environmental laws in
their operations. Their compliance with these requirements could increase the cost of doing business with these facilities. Please
read Part I, Items 1. and 2. “Business and Properties—Environmental.”
In addition, our operations could be adversely affected if shippers of refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane incur additional costs or liabilities associated with regulations, including environmental
regulations. These shippers could increase their charges to us or discontinue service altogether. Similarly, many of our suppliers
face a trend of increasing environmental regulations, which could likewise restrict their ability to produce crude oil or fuels, or
increase their costs of production, and thus impact the price of, and/or their ability to deliver, these products.
Various governmental authorities, including the EPA, have the power to enforce compliance with these regulations and
the permits issued under them, and violators are subject to administrative, civil and criminal penalties, including fines, injunctions
or both. Joint and several liability may be incurred, without regard to fault or the legality of the original conduct, under federal
and state environmental laws for the remediation of contaminated areas at our facilities and those where we do business. Private
parties, including the owners of properties located near our terminal facilities and those with whom we do business, also may
have the right to pursue legal actions against us to enforce compliance with environmental laws, as well as seek damages for
personal injury or property damage. We may also be held liable for damages to natural resources.
The possibility exists that new, stricter laws, regulations or enforcement policies could significantly increase our
compliance costs and the cost of any remediation that may become necessary, some of which may be material. Our insurance may
not cover all environmental risks and costs or may not provide sufficient coverage in the event an environmental claim is made
against us. We may incur increased costs because of stricter pollution control requirements or liabilities resulting from
noncompliance with, or renewal of required operating or other regulatory permits. New environmental regulations, such as those
related to the emissions of GHGs, might adversely affect the market for our products and activities, including the storage of
refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane, as well as our waste management
practices and our control of air emissions. Enactment of laws and passage of regulations regarding GHG emissions, or other
actions to limit GHG emissions may reduce demand for fossil fuels and impact our businesses. Federal, state and municipal
agencies also could impose additional safety regulations to which we would be subject. Because the laws and regulations
applicable to our operations are subject to change, we cannot provide any assurance that compliance with future laws and
regulations will not have a material effect on our results of operations.
Additionally, the construction of new terminals or the expansion of an existing terminal involves numerous regulatory,
environmental, political and legal uncertainties, most of which are not in our control. Delays, litigation, local concerns and
difficulty in obtaining approvals for projects requiring federal, state or municipal permits could impact our ability to build, expand
and operate strategic facilities and infrastructure, which could adversely impact growth and operational efficiency.
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Increased regulation of GHG emissions could result in increased operating costs and reduced demand for refined petroleum
products as a fuel source, which could reduce demand for our products, decrease our revenues and reduce our profitability.
Combustion of fossil fuels, such as the refined petroleum products we sell, results in the emission of carbon dioxide into
the atmosphere. On December 15, 2009, the EPA published its findings that emissions of carbon dioxide and other GHGs present
an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to
warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA has promulgated or adopted
regulations to address GHG emissions from the combustion of fossil fuels from large stationary sources. With respect to
emissions of GHGs from the use of fossil fuels for mobile sources, the EPA has also issued CAFE standards. In 2012, the EPA
issued CAFE standards for fleets of 2022-2025 model year vehicles. In 2016, NHTSA finalized a rule imposing stricter penalties
against those who exceed CAFE standards. In 2018, the EPA proposed a rule that would amend the 2022-2025 CAFE standards.
In 2019, the EPA and NHTSA jointly finalized a rule to reduce the penalties for violations of CAFE standards and to revoke
California’s authority to set its own fuel economy standards. California and a coalition of other states have filed suit to challenge
that rulemaking. Should stricter standards or penalties become effective or should California’s authority to set its own fuel
economy standards be upheld, reductions in emissions of GHGs from the operation of motor vehicles may be required, which
may reduce demand for our products and services. In addition, it is possible federal legislation could be adopted in the future to
restrict GHGs, as Congress has considered various proposals to reduce GHG emissions from time to time. Many states and
regions have adopted GHG initiatives. Please read Part I, Items 1. and 2. “Business and Properties—Environmental—Air
Emissions.”
Future international, federal and state initiatives to control GHG emissions, or an unfavorable outcome in the methane
judicial challenges, could result in increased costs associated with refined petroleum products consumption, such as costs to
install additional controls to reduce GHG emissions or costs to purchase emissions reduction credits to comply with future
emissions trading programs. Please read Part I, Items 1. and 2. “Business and Properties—Environmental—Air Emissions.” Such
increased costs could result in reduced demand for refined petroleum products and some customers switching to alternative
sources of fuel which could have a material adverse effect on our financial condition, results of operations and cash available for
distributions to our unitholders.
Climate change continues to attract considerable public and scientific attention. Recently, litigation has been filed
against companies in the energy industry related to climate change. Should such suits succeed, we could face additional
compliance costs or litigation risks.
Our businesses involve the buying, selling, gathering, blending and shipping of refined petroleum products, gasoline
blendstocks, renewable fuels and crude oil by various modes of transportation, which involves risks of derailment, accidents
and liabilities associated with cleanup and damages, as well as potential regulatory changes that may adversely impact our
businesses, financial condition or results of operations.
Our operations involve the buying and selling, gathering and blending of refined petroleum products, gasoline
blendstocks, renewable fuels and crude oil and shipping it to various markets including on railcars that we lease. The derailments
of trains transporting such products in North America have caused various regulatory agencies and industry organizations, as well
as federal, state and municipal governments, to focus attention on transportation by rail of flammable materials. Additional
measures have been taken in both the United States. and Canada to regulate the transportation of these products. Please read
Part I, Items 1. and 2. “Business and Properties—Environmental— Hazardous Materials Transportation.”
Any changes to the existing laws and regulations, or promulgation of new laws and regulations, including any voluntary
measures by the rail industry, that result in new requirements for the design, construction or operation of tank cars, including
those used to transport crude oil or other products, may require us to make expenditures to comply with new standards that are
material to our operations, and, to the extent that new regulations require design changes or other modifications of tank cars, we
may incur significant constraints on transportation capacity during the period while tank cars are being retrofitted or newly
constructed to comply with the new regulations. We cannot assure that the totality of costs incurred to comply with any new
standards and regulations and any impacts on our operations will not be material
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to our businesses, financial condition or results of operations. In addition, any derailment of railcars or other events related to
products that we have purchased or are shipping may result in claims being brought against us that may involve significant
liabilities. Although we believe that we are adequately insured against such events, we cannot assure you that our policies will
cover the entirety of any damages that may arise from such an event.
We are subject to federal, state and municipal laws and regulations that govern the product quality specifications of the
refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane we purchase, store, transport and
sell.
Various federal, state and municipal government agencies have the authority to prescribe specific product quality
specifications to the sale of commodities. Our businesses include such commodities. Changes in product quality specifications,
such as reduced sulfur content in refined petroleum products, or other more stringent requirements for fuels, could reduce our
ability to procure product and adversely impact related sales volume, require us to incur additional handling costs and/or require
the expenditure of capital. For instance, different product specifications for different markets could require additional storage. If
we are unable to procure product or recover these costs through increased sales, we may not be able to meet our financial
obligations. Failure to comply with these regulations could also result in substantial penalties.
We are subject to federal, state and municipal environmental regulations which could have a material adverse effect on our
retail operations business.
Our retail operations are subject to extensive federal, state and municipal laws and regulations, including those relating
to the protection of the environment, waste management, discharge of hazardous materials, pollution prevention, as well as laws
and regulations relating to public safety and health. Certain of these laws and regulations may require assessment or remediation
efforts. Retail operations with USTs are subject to federal and state regulations and legislation. Compliance with existing and
future environmental laws regulating USTs may require significant capital expenditures and increased operating and maintenance
costs. The operation of USTs also poses certain other risks, including damages associated with soil and groundwater
contamination. Leaks from USTs which may occur at one or more of our gas stations may impact soil or groundwater and could
result in fines or civil liability for us. We may be required to make material expenditures to modify operations, perform site
cleanups or curtail operations.
We are subject to federal and state non‑‑environmental regulations which could have an adverse effect on our convenience
store business and results of operations.
Our convenience store business is subject to extensive governmental laws and regulations that include legal restrictions
on the sale of alcohol, tobacco and lottery products, food labelling, food preparation, safety and health requirements and public
accessibility. Furthermore, state and local regulatory agencies have the power to approve, revoke, suspend, or deny applications
for and renewals of permits and licenses relating to the sale of alcohol, tobacco and lottery products or to seek other remedies. A
violation of or change in such laws and/or regulations could have an adverse effect on our convenience store business and results
of operations.
Regulations related to wages also affect our businesses. Any increase in the statutory minimum wage would result in an
increase in our labor costs and such cost increase could adversely affect our businesses, financial condition and results of
operations.
Any terrorist attacks aimed at our facilities and any global and domestic economic repercussions from terrorist activities and
the government’s response could adversely affect our financial condition, results of operations and cash available for
distribution to our unitholders.
Since the September 11, 2001 terrorist attacks on the United States, the U.S. government has issued warnings that energy
assets may be future targets of terrorist organizations. In addition to the threat of terrorist attacks, we face various other security
threats, including cyber security threats to gain unauthorized access to sensitive information or systems or to render data or
systems unusable; threats to the safety of our employees; threats to the security of our
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facilities, such as terminals and pipelines, and infrastructure or third‑party facilities and infrastructure. These developments have
subjected our operations to increased risks.
Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to security
threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from
materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure,
personnel or capabilities, essential to our operations and could have a material adverse effect on our reputation, financial position,
results of operations, or cash flows. Cyber security attacks in particular are evolving and include malicious software, attempts to
gain unauthorized access to, or otherwise disrupt, pipeline control systems, attempts to gain unauthorized access to data, and other
electronic security breaches that could lead to disruptions in critical systems, including pipeline control systems, unauthorized
release of confidential or otherwise protected information and corruption of data. These events could damage our reputation and
lead to financial losses from remedial actions, loss of business or potential liability.
We incur costs for providing facility security and may incur additional costs in the future with respect to the receipt,
storage and distribution of our products. Additional security measures could also restrict our ability to distribute refined petroleum
products, gasoline blendstocks, renewable fuels, crude oil and propane. Any future terrorist attack on our facilities, or those of our
customers, could have a material adverse effect on our financial condition, results of operations and cash available for distribution
to our unitholders.
Terrorist activity could lead to increased volatility in prices for home heating oil, gasoline and other products we sell,
which could decrease our customers’ demand for these products. Insurance carriers are required to offer coverage for terrorist
activities as a result of federal legislation. We purchase this coverage with respect to our property and casualty insurance
programs. This additional coverage resulted in additional insurance premiums which could increase further in the future.
We depend on key personnel for the success of our businesses.
We depend on the services of our senior management team and other key personnel. The loss of the services of any
member of senior management or key employee could have an adverse effect on our financial condition, results of operations and
cash available for distribution to our unitholders. We may not be able to locate or employ on acceptable terms qualified
replacements for senior management or other key employees if their services were no longer available.
Certain executive officers of our general partner perform services for one of our affiliates pursuant to a shared services
agreement. Please read Part III, Item 13, “Certain Relationships and Related Transactions, and Director Independence—
Relationship of Management with Global Petroleum Corp.”
We depend on unionized labor for the operation of certain of our terminals. Any work stoppages or labor disturbances at these
terminals could disrupt our businesses.
Any work stoppages or labor disturbances by our unionized labor force at facilities with an organized workforce could
have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders. In
addition, employees who are not currently represented by labor unions may seek representation in the future, and any
renegotiation of collective bargaining agreements may result in terms that are less favorable to us.
We rely on our information technology systems to manage numerous aspects of our businesses, and a disruption of these
systems could adversely affect our businesses.
We depend on our information technology (“IT”) systems to manage numerous aspects of our businesses and to provide
analytical information to management. Our IT systems are an essential component of our businesses and growth strategies, and a
serious disruption to our IT systems could significantly limit our ability to manage and operate our businesses effectively. These
systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system
and network failures, loss of telecommunication services, physical and electronic loss of data, cyber and other security breaches
and computer viruses. While we believe we have adequate systems and
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controls in place, we are continuously working to install new, and upgrade existing, information technology systems and provide
employee awareness around phishing, malware and other cyber risks in an effort to ensure that we are protected against cyber
risks and security breaches. We have a disaster recovery plan in place, but this plan may not entirely prevent delays or other
complications that could arise from an IT systems failure or disruption. Any failure or interruption in our IT systems could have a
negative impact on our operating results, cause our businesses and competitive position to suffer and damage our reputation.
In the normal course of our businesses, we may obtain personal data, including credit card information. While we
believe we have adequate cyber and other security controls over individually identifiable customer, employee and vendor data
provided to us, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable
customer or other sensitive data could nonetheless occur and have a material adverse effect on our reputation, operating results
and financial condition.
If we fail to maintain an effective system of internal controls, then we may not be able to accurately report our financial
results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which
could harm our businesses and could adversely influence the trading price of our units.
Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate
successfully as a public company. If our efforts to maintain internal controls are not successful or if we are unable to maintain
adequate controls over our financial processes and reporting in the future or if we are unable to comply with our obligations under
Section 404 of the Sarbanes‑Oxley Act of 2002, our operating results could be harmed or we may fail to meet our reporting
obligations. Ineffective internal controls also could cause investors to lose confidence in our reported financial information, which
could have a negative effect on the trading price of our units.
Risks Related to our Structure
Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which could permit them to favor
their own interests to the detriment of our unitholders.
As of March 4, 2020, affiliates of our general partner, including directors and executive officers and their affiliates,
owned 21.4% of our common units and the entire general partner interest. Although our general partner has a fiduciary duty to
manage us in a manner beneficial to us and our unitholders, the directors and officers of our general partner have a fiduciary duty
to manage our general partner in a manner beneficial to its owners. Furthermore, certain directors and officers of our general
partner are directors or officers of affiliates of our general partner. Conflicts of interest may arise between our general partner and
its affiliates, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner may
favor its own interests and the interests of its affiliates over the interests of our unitholders. Please read “—Our partnership
agreement limits our general partner’s fiduciary duties to unitholders and restricts the remedies available to unitholders for actions
taken by our general partner that might otherwise constitute breaches of fiduciary duty.” These conflicts include, among others,
the following situations:
· Our general partner is allowed to take into account the interests of parties other than us, such as affiliates of its
members, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.
· Affiliates of our general partner may engage in competition with us under certain circumstances. Please read “—
Certain members of the Slifka family and their affiliates may engage in activities that compete directly with us.”
· Neither our partnership agreement nor any other agreement requires owners of our general partner to pursue a
business strategy that favors us. Directors and officers of our general partner’s owners have a fiduciary duty to make
these decisions in the best interest of such owners which may be contrary to our interests.
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·
Some officers of our general partner who provide services to us devote time to affiliates of our general partner.
· Our general partner has limited its liability and reduced its fiduciary duties under the partnership agreement, while
also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute
breaches of fiduciary duty. As a result of purchasing common units, common unitholders consent to some actions
and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state
law. Additionally, our partnership agreement provides that we, and the officers and directors of our general partner,
do not owe any duties, including fiduciary duties, or have any liabilities to holders of the Series A Preferred Units.
· Our general partner determines the amount and timing of asset purchases and sales, borrowings, issuances of
additional partnership securities and reserves, each of which can affect the amount of cash available for distribution
to our unitholders.
· Our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure
is a maintenance capital expenditure, which reduces distributable cash flow, or a capital expenditure for acquisitions
or capital improvements, which does not, and such determination can affect the amount of cash distributed to our
unitholders.
·
In some instances, our general partner may cause us to borrow funds in order to permit the payment of cash
distributions, even if the purpose or effect of the borrowing is to make incentive distributions.
· Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.
· Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any
services rendered on terms that are fair and reasonable to us or entering into additional contractual arrangements
with any of these entities on our behalf.
· Our general partner intends to limit its liability regarding our contractual and other obligations.
· Our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more
than 80% of the common units.
· Our general partner controls the enforcement of obligations owed to us by it and its affiliates.
· Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
Please read Part III, Item 13, “Certain Relationships and Related Transactions, and Director Independence—
Noncompetition.”
Our partnership agreement limits our general partner’s fiduciary duties to unitholders and restricts the remedies available to
unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise
be held by state fiduciary duty law. Our partnership agreement provides that we, and the officers and directors of our general
partner, do not owe any duties, including fiduciary duties, or have any liabilities to holders of the Series A Preferred Units.
Additionally, our partnership agreement:
·
permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as
our general partner. This entitles our general partner to consider only the interests and factors
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that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us,
our affiliates or any limited partner. Examples include the exercise of its limited call right, its voting rights with
respect to the units it owns, its registration rights and its determination whether or not to consent to any merger or
consolidation of us;
provides that our general partner shall not have any liability to us or our unitholders for decisions made in its
capacity as general partner so long as it acted in good faith, meaning it believed that the decision was in our best
interests;
generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts
committee of the board of directors of our general partner and not involving a vote of unitholders must be on terms
no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair
and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our
general partner may consider the totality of the relationships between the parties involved, including other
transactions that may be particularly advantageous or beneficial to us; and
provides that our general partner and its officers and directors will not be liable for monetary damages to us, our
limited partners or assignees for any acts or omissions unless there has been a final and non‑appealable judgment
entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad
faith or engaged in fraud or willful misconduct.
·
·
·
By purchasing a unit, a unitholder will become bound by the provisions of the partnership agreement, including the
provisions described above.
Unitholders have limited voting rights and are not entitled to elect our general partner or its directors or remove our general
partner without the consent of the holders of at least 66 2/3% of the outstanding common units (including common units held
by our general partner and its affiliates), which could lower the trading price of our units.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting
our businesses and, therefore, limited ability to influence management’s decisions regarding our businesses. Unitholders have no
right to elect our general partner or its board of directors on an annual or other continuing basis. The board of directors of our
general partner is chosen entirely by its members and not by the unitholders. Furthermore, if the unitholders are dissatisfied with
the performance of our general partner, they have limited ability to remove our general partner. The vote of the holders of at least
66 2/3% of all outstanding common units (including common units held by our general partner and its affiliates) is required to
remove our general partner.
Although the holders of the Series A Preferred Units are entitled to limited protective voting rights with respect to
certain matters, the Series A Preferred Units generally vote separately as a class along with any other series of parity securities
that we may issue upon which like voting rights have been conferred and are exercisable. As a result, the voting rights of holders
of Series A Preferred Units may be significantly diluted, and the holders of such other series of parity securities that we may issue
may be able to control or significantly influence the outcome of any vote.
As a result of these limitations, the prices at which the common units and the Series A Preferred Units trade could
diminish because of the absence or reduction of a takeover premium in the trading price.
We may issue additional units without unitholder approval, which would dilute unitholders’ ownership interests.
Except in the case of the issuance of units that rank equal to or senior to the Series A Preferred Units, we may issue an
unlimited number of limited partner interests of any type without the approval of our unitholders. We are allowed to issue
additional Series A Preferred Units and parity securities without any vote of the holders of the Series A Preferred Units, except
where the cumulative distributions on the Series A Preferred Units or any parity securities are in arrears.
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The issuance by us of additional common units or other equity securities of equal or senior rank will have the following
effects:
·
·
·
·
our unitholders’ proportionate ownership interest in us will decrease;
the amount of cash available for distribution on each unit may decrease;
the relative voting strength of each previously outstanding unit may be diminished; and
the market price of the units may decline.
We are prohibited from paying distributions on our common units if distributions on our Series A Preferred Units are in
arrears.
The holders of our Series A Preferred Units are entitled to certain rights that are senior to the rights of holders of our
common units, such as rights to distributions and rights upon liquidation of the Partnership. If we do not pay the required
distributions on our Series A Preferred Units, we will be unable to pay distributions on our common units. Additionally, because
distributions to our Series A Preferred unitholders are cumulative, we will have to pay all unpaid accumulated preferred
distributions before we can pay any distributions to our common unitholders. Also, because distributions to our common
unitholders are not cumulative, if we do not pay distributions on our common units with respect to any quarter, our common
unitholders will not be entitled to receive distributions covering any prior periods if we later commence paying distributions on
our common units. The preferences and privileges of the Series A Preferred Units could adversely affect the market price for our
common units, or could make it more difficult for us to sell our common units in the future.
Our Series A Preferred Units are subordinated to our existing and future debt obligations and could be diluted by the issuance
of additional units, including additional Series A Preferred Units, and by other transactions.
The Series A Preferred Units are subordinated to all of our existing and future indebtedness. The payment of principal
and interest on our debt reduces cash available for distribution to our limited partners, including the holders of our Series A
Preferred Units. The issuance of additional units on parity with or senior to the Series A Preferred Units (including additional
Series A Preferred Units) would dilute the interests of the holders of the Series A Preferred Units, and any issuance of equal or
senior ranking securities or additional indebtedness could affect our ability to pay distributions on, redeem or pay the liquidation
preference on the Series A Preferred Units.
We cannot assure that we will be able to pay distributions on our Series A Preferred Units regularly, and the agreements
governing our indebtedness may limit the cash available to make distributions on the Series A Preferred Units.
Pursuant to our partnership agreement, we distribute all of our “available cash” each quarter to our limited partners. Our
partnership agreement defines “Available Cash” to generally mean, for each fiscal quarter, all cash and cash equivalents on hand
on the date of determination of available cash with respect to such quarter, less the amount of any cash reserves established by our
general partner to:
·
·
·
provide for the proper conduct of our businesses;
comply with applicable law or the terms of any of our debt instruments or other agreements; or
provide funds for distributions to holders of our common units and Series A Preferred Units for any one or more of
the next four quarters.
As a result, we do not expect to accumulate significant amounts of cash. Depending on the timing and amount of our
cash distributions, these distributions could significantly reduce the cash available to us in subsequent periods to
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make distributions on the Series A Preferred Units.
Further, our existing debt agreements also may limit our ability to pay distributions on the Series A Preferred Units.
Change of control conversion rights may make it more difficult for a party to acquire us or discourage a party from acquiring
us.
The change of control conversion feature of the Series A Preferred Units may have the effect of discouraging a third
party from making an acquisition proposal for us or of delaying, deferring or preventing certain of our change of control
transactions under circumstances that otherwise could provide the holders of our common units and Series A Preferred Units with
the opportunity to realize a premium over the then-current market price of such equity securities or that unitholders may
otherwise believe is in their best interests.
The market price of our common units could be adversely affected by sales of substantial amounts of our common units,
including sales by our existing unitholders.
A substantial number of our securities may be sold in the future either pursuant to Rule 144 under the Securities Act or
pursuant to a registration statement filed with the SEC. Rule 144 under the Securities Act provides that after a holding period of
six months, non‑affiliates may resell restricted securities of reporting companies, provided that current public information for the
reporting company is available. After a holding period of one year, non‑affiliates may resell without restriction, and affiliates may
resell in compliance with the volume, current public information and manner of sale requirements of Rule 144. Pursuant to our
partnership agreement, members of the Slifka family have registration rights with respect to the common units owned by them.
Sales by any of our existing unitholders of a substantial number of our common units, or the perception that such sales
might occur, could have a material adverse effect on the price of our common units or could impair our ability to obtain capital
through an offering of equity securities.
Future market fluctuations may result in a lower price of our common units.
An increase in interest rates may cause the market price of our units to decline.
Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting
these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower‑risk
investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk‑adjusted rates of return by purchasing
government‑backed debt securities may cause a corresponding decline in demand for riskier investments generally, including
yield‑based equity investments such as publicly‑traded limited partnership interests. Reduced demand for our common units
resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units
to decline.
One of the factors that influences the price of the Series A Preferred Units is the distribution yield on the Series A
Preferred Units (as a percentage of the price of the Series A Preferred Units) relative to market interest rates. An increase in
market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of the Series A
Preferred Units to expect a higher distribution yield, and higher interest rates would likely increase our borrowing costs and
potentially decrease funds available for distribution to our limited partners, including the holders of the Series A Preferred Units.
Accordingly, higher market interest rates could cause the market price of the Series A Preferred Units to decrease.
In addition, on and after August 15, 2023, the Series A Preferred Units will have a floating distribution rate set each
quarterly distribution period at a percentage of the $25.00 liquidation preference equal to a floating rate of the then-current three-
month LIBOR (or if LIBOR is no longer available as otherwise provided for in our partnership agreement) plus a spread of
6.774% per annum. The per annum distribution rate that is determined on the relevant determination date will apply to the entire
quarterly distribution period following such determination date even if LIBOR (or an
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alternative rate, as applicable) increases during that period. As a result, the holders of the Series A Preferred Units will be subject
to risks associated with fluctuation in interest rates and the possibility that holders will receive distributions that are lower than
expected. We have no control over a number of factors, including economic, financial and political events, that impact market
fluctuations in interest rates, which have in the past and may in the future experience volatility.
Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or
price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will
have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the
common units held by unaffiliated persons at a price not less than their then‑current market price. As a result, unitholders may be
required to sell their common units at an undesirable time or price and may not receive any return on their investment.
Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness
opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no
restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its
call right. If our general partner exercises its limited call right, the effect would be to take us private and, if the units were
subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934.
Our partnership agreement restricts the voting rights of unitholders owning 20% or more of any class of our units.
Our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person that owns
20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who
acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter. Our
partnership agreement also contains provisions limiting the ability of unitholders to call meetings or acquire information about
our operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management.
Cost reimbursements due to our general partner and its affiliates will reduce cash available for distribution to our unitholders.
Prior to making any distribution on the common units, we reimburse our general partner and its affiliates for all expenses
they incur on our behalf, which is determined by our general partner in its sole discretion. These expenses include all costs
incurred by the general partner and its affiliates in managing and operating us, including costs for rendering corporate staff and
support services to us. We are managed and operated by directors and executive officers of our general partner. In addition, the
majority of our operating personnel are employees of our general partner. Please read Part III, Item 13, “Certain Relationships and
Related Transactions, and Director Independence.” The reimbursement of expenses and payment of fees, if any, to our general
partner and its affiliates could adversely affect our ability to pay cash distributions to our unitholders.
Unitholders may not have limited liability if a court finds that unitholder action constitutes control of our businesses.
A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those
contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is
organized under Delaware law, and we conduct business in a number of other states. The limitations on the liability of holders of
limited partner interests for the obligations of a limited partnership have not been clearly established in some of the other states in
which we do business. A unitholder could be liable for our obligations as if he were a general partner if:
·
a court or government agency determined that we were conducting business in a state but had not complied with that
particular state’s partnership statute; or
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·
a unitholder’s right to act with other unitholders to remove or replace the general partner, approve some
amendments to our partnership agreement or take other actions under our partnership agreement constitute “control”
of our businesses.
Unitholders may have liability to repay distributions.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under
Delaware law, we may not make a distribution to unitholders if the distribution would cause our liabilities to exceed the fair value
of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited
partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to
the limited partnership for the distribution amount. Purchasers of units who become limited partners are liable for the obligations
of the transferring limited partner to make contributions to us that are known to the purchaser of units at the time it became a
limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to
partners on account of their partnership interests and liabilities that are non‑recourse to us are not counted for purposes of
determining whether a distribution is permitted.
The control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially
all of its assets without the consent of the unitholders. Furthermore, there is no restriction in the partnership agreement on the
ability of the members of our general partner from transferring their respective membership interests in our general partner to a
third party. The new members of our general partner would then be in a position to replace the board of directors and officers of
our general partner with their own choices and control the decisions taken by the board of directors and officers of our general
partner.
Certain members of the Slifka family and their affiliates may engage in activities that compete directly with us.
Mr. Richard Slifka and his affiliates (other than us) are subject to noncompetition provisions in the omnibus agreement
and business opportunity agreement. In addition, Mr. Eric Slifka’s and Mr. Andrew Slifka’s employment agreements contain
noncompetition provisions. These agreements do not prohibit Messrs. Richard Slifka, Eric Slifka and Andrew Slifka and certain
affiliates of our general partner from owning certain assets or engaging in certain businesses that compete directly or indirectly
with us. Please read Part III, Item 13, “Certain Relationships and Related Transactions, and Director Independence—
Noncompetition.”
Tax Risks
Our tax treatment depends on our status as a partnership for federal income tax purposes and not being subject to a material
amount of entity-level taxation. If the Internal Revenue Service, or IRS, were to treat us as a corporation for federal income
tax purposes, or we become subject to entity level taxation for state tax purposes, our cash available for distribution to our
unitholders would be substantially reduced.
The anticipated after‑tax economic benefit of an investment in our common units depends largely on our being treated as
a partnership for federal income tax purposes.
Despite the fact that we are organized as a limited partnership under Delaware law, we would be treated as a corporation
for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations and
current Treasury Regulations, we believe we satisfy the qualifying income requirement. However, no ruling has been or will be
requested regarding our treatment as a partnership for U.S. federal income tax purposes. Failing to meet the qualifying income
requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or
otherwise subject us to taxation as an entity.
If we were treated as a corporation for federal income tax purposes, we would pay U.S. federal income tax on our
taxable income at the corporate tax rate. Distributions to our unitholders would generally be taxed again as corporate
distributions, and no income, gains, losses or deductions would flow through to our unitholders. Because a tax would be
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imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Therefore,
treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our
unitholders, likely causing a substantial reduction in the value of our common units.
Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that
subjects us to taxation as a corporation or otherwise subjects us to additional amounts of entity level taxation for federal, state,
municipal or foreign income tax purposes, the minimum quarterly distribution amount and the target distribution amounts may be
adjusted to reflect the impact of that law or interpretation on us. At the state level, several states have been evaluating ways to
subject partnerships to entity-level taxation through the imposition of state income, franchise or other forms of taxation. We
currently own assets and conduct business in several states that impose a margin or franchise tax. In the future, we may expand
our operations. Imposition of a similar tax on us in other jurisdictions that we may expand to could substantially reduce our cash
available for distribution to our unitholders.
The tax treatment of publicly traded partnerships or an investment in our units could be negatively impacted by future
legislative, judicial or administrative changes in applicable tax laws or differing interpretations thereof, possibly applied on a
retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our
units, may be negatively impacted by future administrative, legislative or judicial changes or differing interpretations thereof at
any time. From time to time, members of Congress have proposed and considered substantive changes to the existing U.S. federal
income tax laws that would affect publicly traded partnerships, including elimination of partnership tax treatment for publicly
traded partnerships. For example, the “Clean Energy for America Act”, which is similar to legislation that was commonly
proposed during the Obama Administration, was introduced in the Senate on May 2, 2019. If enacted, this proposal would, among
other things, repeal the qualifying income exception within Section 7704(d)(1)(E) of the Internal Revenue Code upon which we
rely for our treatment as a partnership for U.S. federal income tax purposes. In addition, the Treasury Department has issued, and
in the future may issue, regulations interpreting those laws that affect publicly traded partnerships. There can be no assurance that
there will not be further changes to U.S. federal income tax laws or the Treasury Department’s interpretation of such laws in a
manner that could impact our ability to qualify as a publicly traded partnership in the future.
Any modification to the U.S. federal income tax laws or interpretations thereof may be applied retroactively and could
make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as
partnerships for U.S. federal income tax purposes. We are unable to predict whether any changes or other proposals will
ultimately be enacted. In addition, there can be no assurance that there will not be any legislative, judicial or administrative
changes in tax law generally that would negatively impact the value of an investment in our units. You are urged to consult with
your own tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals in tax law
generally and their potential effect on your investment in our units.
We have subsidiaries that are treated as corporations for federal income tax purposes and subject to corporate‑‑level income
taxes.
As of December 31, 2019, we conducted substantially all of our operations of our end‑user business through six
subsidiaries that are treated as corporations for federal income tax purposes. These corporations primarily engage in the retail sale
of gasoline and/or operate convenience stores and collect rents on personal property leased to dealers and commissioned agents at
other stations. We may elect to conduct additional operations through these corporate subsidiaries in the future. These corporate
subsidiaries are subject to corporate‑level taxes, which reduce the cash available for distribution to us and, in turn, to common
unitholders. If the IRS were to successfully assert that these corporations have more tax liability than we anticipate or legislation
were enacted that increased the corporate tax rate, our cash available for distribution to common unitholders would be further
reduced.
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If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our common units,
and the costs of any such contest would reduce our cash available for distribution to our common unitholders.
We have not requested a ruling from the IRS with respect to our treatment as a partnership for U.S. federal income tax
purposes. The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to administrative or
court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take.
Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade.
Moreover, the costs of any contest between us and the IRS will result in a reduction in our cash available for distribution to our
common unitholders and thus will be borne indirectly by our common unitholders.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some
states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit
adjustments directly from us, in which case our cash available for distribution to our common unitholders might be
substantially reduced and our current and former common unitholders may be required to indemnify us for any taxes
(including any applicable penalties and interest) resulting from such audit adjustments that were paid on such common
unitholders’ behalf.
Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes an
audit adjustment to our income tax return, it (and some states) may assess and collect any taxes (including any applicable
penalties and interest) resulting from such audit adjustment directly from us. To the extent possible under the new rules, our
general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are
eligible, issue a revised information statement to each common unitholder and former common unitholder with respect to an
audited and adjusted return. Although our general partner may elect to have our common unitholders and former common
unitholders take such audit adjustment into account and pay any resulting taxes (including applicable penalties or interest) in
accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical,
permissible or effective in all circumstances. As a result, our current common unitholders may bear some or all of the tax liability
resulting from such audit adjustment, even if such common unitholders did not own units in us during the tax year under audit. If,
as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for
distribution to our common unitholders might be substantially reduced and our current and former common unitholders may be
required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that
were paid on such common unitholders’ behalf. These rules are not applicable for tax years beginning on or prior to December 31,
2017.
Even if our common unitholders do not receive any cash distributions from us, they will be required to pay taxes on their share
of our taxable income.
Because common unitholders are treated as partners to whom we allocate taxable income, which could be different in
amount than the cash we distribute, common unitholders are required to pay any federal income taxes and, in some cases, state
and local income taxes on their share of our taxable income even if they do not receive any cash distributions from us. For
example, if we sell assets and use the proceeds to repay existing debt or fund capital expenditures, you may be allocated taxable
income and gain resulting from the sale and our cash available for distribution would not increase. Similarly, taking advantage of
opportunities to reduce our existing debt, such as debt exchanges, debt repurchases, or modifications of our existing debt could
result in “cancellation of indebtedness income” being allocated to our common unitholders as taxable income without any
increase in our cash available for distribution. Our common unitholders may not receive cash distributions from us equal to their
share of our taxable income or even equal to the tax liability that results from that income.
Tax gain or loss on the disposition of our common units could be more or less than expected.
If a unitholder sells common units, the unitholder will recognize a gain or loss equal to the difference between the
amount realized and that unitholder’s tax basis in those common units. Because distributions in excess of a common
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unitholder’s allocable share of our net taxable income decrease such unitholder’s tax basis in its common units, the amount, if
any, of such prior excess distributions with respect to the common units a unitholder sells will, in effect, become taxable income
to a unitholder if it sells such units at a price greater than its tax basis in those units, even if the price such unitholder receives is
less than its original cost. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if a
unitholder sells its common units, the unitholder may incur a tax liability in excess of the amount of cash received from the sale.
A substantial portion of the amount realized from a unitholder’s sale of our common units, whether or not representing
gain, may be taxed as ordinary income to such unitholder due to potential recapture items, including depreciation recapture. Thus,
a common unitholder may recognize both ordinary income and capital loss from the sale of units if the amount realized on a sale
of such units is less than such unitholder’s adjusted basis in the common units. Net capital loss may only offset capital gains and,
in the case of individuals, up to $3,000 of ordinary income per year. In the taxable period in which a unitholder sells its common
units, such unitholder may recognize ordinary income from our allocations of income and gain to such unitholder prior to the sale
and from recapture items that generally cannot be offset by any capital loss recognized upon the sale of units.
Common unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or
business during our taxable year. However, under the Tax Cuts and Jobs Act, for taxable years beginning after December 31,
2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable
income.” For the purposes of this limitation, our adjusted taxable income is computed without regard to any business interest
expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable
for depreciation, amortization, or depletion to the extent such depreciation, amortization, or depletion is not capitalized into cost
of goods sold with respect to inventory. If our “business interest” is subject to limitation under these rules, our unitholders will be
limited in their ability to deduct their share of any interest expense that has been allocated to them. As a result, common
unitholders may be subject to limitation on their ability to deduct interest expense incurred by us which could negatively impact
the value of an investment in our common units. You are urged to consult with your own tax advisor with respect to this potential
limitation on the deductibility of interest expense and its impact on your investment in our common units.
Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to
them.
Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement
accounts (known as IRAs) raises issues unique to them. For example, virtually all of our income allocated to organizations that
are exempt from U.S. federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income
and will be taxable to them. With respect to taxable years beginning after December 31, 2017, subject to the proposed aggregation
rules for certain similarly situated businesses or activities issued by the Treasury Department, a tax-exempt entity with more than
one unrelated trade or business (including by attribution from investment in a partnership such as ours) is required to compute the
unrelated business taxable income of such tax-exempt entity separately with respect to each such trade or business (including for
purposes of determining any net operating loss deduction). As a result, for years beginning after December 31, 2017, it may not
be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated business taxable
income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor before investing
in our common units.
Non-U.S. Unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from
owning our units.
Non-U.S. unitholders are generally taxed and subject to income tax filing requirements by the United States on income
effectively connected with a U.S. trade or business (“effectively connected income”). Income allocated to our common
unitholders and any gain from the sale of our units will generally be considered to be “effectively connected” with a U.S. trade or
business. As a result, distributions to a non-U.S. unitholder will be subject to withholding at the
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highest applicable effective tax rate and a non-U.S. unitholder who sells or otherwise disposes of a unit will also be subject to
U.S. federal income tax on the gain realized from the sale or disposition of that unit.
Moreover, the transferee of an interest in a partnership that is engaged in a U.S. trade or business is generally required to
withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are
required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not
withheld. Because the “amount realized” includes a partner’s share of the partnership’s liabilities, 10% of the amount realized
could exceed the total cash purchase price for the units. However, pending the issuance of final regulations, the IRS has
suspended the application of this withholding rule to transfers of publicly traded interests in publicly traded partnerships. If
recently promulgated regulations are finalized as proposed, such regulations would provide, with respect to transfers of publicly
traded interests in publicly traded partnerships effected through a broker, that the obligation to withhold is imposed on the
transferor’s broker and that a partner’s “amount realized” does not include a partner’s share of a publicly traded partnership’s
liabilities for purposes of determining the amount subject to withholding. However, it is not clear when such regulations will be
finalized and if they will be finalized in their current form.
We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually
purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.
Because we cannot match transferors and transferees of common units, we have adopted certain methods for allocating
depreciation and amortization deductions that may not conform to all aspects of existing Treasury Regulations. A successful IRS
challenge to the use of these methods could adversely affect the amount of tax benefits available to our unitholders. It also could
affect the timing of these tax benefits or the amount of gain from any sale of common units and could have a negative impact on
the value of our common units or result in audit adjustments to a unitholder’s tax returns.
We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units
each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date
a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of
income, gain, loss and deduction among our unitholders.
We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common
units each month based upon the ownership of our common units on the first day of each month (the “Allocation Date”), instead
of on the basis of the date a particular common unit is transferred. Similarly, we generally allocate certain deductions for
depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets and, in the discretion of the
general partner, any other extraordinary item of income, gain, loss or deduction based upon ownership on the Allocation Date.
Treasury Regulations allow a similar monthly simplifying convention, but such regulations do not specifically authorize all
aspects of our proration method. If the IRS were to challenge our proration method, we may be required to change the allocation
of items of income, gain, loss and deduction among our unitholders.
A unitholder whose common units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of
common units) may be considered to have disposed of those common units. If so, such unitholder would no longer be treated
for tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss
from the disposition.
Because there are no specific rules governing the U.S. federal income tax consequences of loaning a partnership interest,
a unitholder whose common units are the subject of a securities loan may be considered to have disposed of the loaned units. In
that case, the unitholder may no longer be treated for tax purposes as a partner with respect to those common units during the
period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the
period of the loan, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the
unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary
income. Unitholders desiring to assure their status as partners and avoid
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the risk of gain recognition from a securities loan are urged consult a tax advisor to determine whether it is advisable to modify
any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.
We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and
deduction. The IRS may challenge these methodologies or the resulting allocations, which could adversely affect the value of
our common units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, we must routinely determine
the fair market value of our assets. Although we may, from time to time, consult with professional appraisers regarding valuation
matters, we make many fair market value estimates using a methodology based on the market value of our common units as a
means to measure the fair market value of our assets. The IRS may challenge these valuation methods and the resulting
allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the timing or amount of taxable
income or loss being allocated to our unitholders. It also could affect the amount of gain recognized from the sale of our common
units, have a negative impact on the value of our common units or result in audit adjustments to our unitholders’ tax returns
without the benefit of additional deductions.
Unitholders may be subject to state and local taxes and return filing requirements in jurisdictions where they do not live as a
result of investing in our common units.
In addition to U.S. federal income taxes, our unitholders may be subject to other taxes, including foreign, state and local
taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in
which we conduct business or own property now or in the future, even if they do not live in any of those jurisdictions. Our
unitholders will likely be required to file foreign, state and local income tax returns and pay state and local income taxes in some
or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those
requirements.
We currently own assets and conduct business in several states, some of which impose a personal income tax on
individuals, corporations and other entities. As we make acquisitions or expand our businesses, we may own assets or conduct
business in additional states that impose a personal income tax. It is our unitholders’ responsibility to file all U.S. federal, state,
municipal and non‑U.S. tax returns and pay any taxes due in these jurisdictions. Unitholders should consult with their own tax
advisors regarding the filing of such tax returns, the payment of such taxes, and the deductibility of any taxes paid.
Treatment of distributions on our Series A Preferred Units as guaranteed payments for the use of capital creates a different
tax treatment for the holders of Series A Preferred Units than the holders of our common units and such distributions may not
be eligible for the 20% deduction for qualified publicly traded partnership income.
The tax treatment of distributions on our Series A Preferred Units is uncertain. We will treat each of the holders of the
Series A Preferred Units as partners for tax purposes and will treat income attributable to distributions on the Series A Preferred
Units as guaranteed payments for the use of capital that will generally be taxable to each of the holders of Series A Preferred
Units as ordinary income. Holders of our Series A Preferred Units will recognize taxable income from the accrual of such a
guaranteed payment (even in the absence of a contemporaneous cash distribution). Otherwise, except in the case of our
liquidation, the holders of Series A Preferred Units are generally not anticipated to share in our items of income, gain, loss or
deduction, nor will we allocate any share of our nonrecourse liabilities to the holders of Series A Preferred Units. If distributions
on the Series A Preferred Units were treated as payments on indebtedness for tax purposes, rather than as guaranteed payments
for the use of capital, distributions likely would be treated as payments of interest by us to each of the holders of Series A
Preferred Units.
Although we expect that much of the income we earn is generally eligible for the 20% deduction for qualified publicly
traded partnership income, recently issued final Treasury Regulations provide that income attributable to a guaranteed payment
for the use of capital is not eligible for the 20% deduction for qualified publicly traded partnership
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income. As a result, income attributable to a guaranteed payment for use of capital recognized by holders of our Series A
Preferred Units is not eligible for the 20% deduction for qualified publicly traded partnership income.
A holder of Series A Preferred Units will be required to recognize gain or loss on a sale of Series A Preferred Units
equal to the difference between the amount realized by such holder and such holder’s tax basis in the Series A Preferred Units
sold. The amount realized generally will equal the sum of the cash and the fair market value of other property such holder
receives in exchange for such Series A Preferred Units. Subject to general rules requiring a blended basis among multiple
partnership interests, the tax basis of a Series A Preferred Units will generally equal the sum of the cash and the fair market value
of other property paid by the holder of such Series A Preferred Units to acquire such Series A Preferred Units. Gain or loss
recognized by a holder of Series A Preferred Units on the sale or exchange of a Series A Preferred Unit held for more than one
year generally will be taxable as long-term capital gain or loss. Because holders of Series A Preferred Units will generally not be
allocated a share of our items of depreciation, depletion or amortization, it is not anticipated that such holders will be required to
recharacterize any portion of their gain as ordinary income as a result of the recapture rules.
Investment in the Series A Preferred Units by tax-exempt investors, such as employee benefit plans and individual
retirement accounts, and non-United States persons raises issues unique to them. The treatment of guaranteed payments for the
use of capital to tax-exempt investors is not certain and the income resulting from such payments may be treated as unrelated
business taxable income for federal income tax purposes. Distributions to non-United States holders of Series A Preferred Units
will be subject to withholding taxes. If the amount of withholding exceeds the amount of United States federal income tax due,
non-United States holders of Series A Preferred Units may be required to file United States federal income tax returns in order to
seek a refund of such excess.
All holders of our Series A Preferred Units are urged to consult a tax advisor with respect to the consequences of owning
our Series A Preferred Units.
Item 1B. Unresolved Staff Comments.
None.
Item 3. Legal Proceedings.
The information required by this item is included in Note 23 of Notes to Consolidated Financial Statements and is
incorporated herein by reference.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Market Information and Holders
Our common units trade on the New York Stock Exchange (“NYSE”) under the symbol “GLP.” At the close of business
on March 2, 2020, based upon information received from our transfer agent and brokers and nominees, we had 11,598 common
unitholders, including beneficial owners of common units held in street name.
Distributions of Available Cash
Common Units and General Partner Interest
We intend to make cash distributions to common unitholders on a quarterly basis, although there is no assurance as to
the future cash distributions since they are dependent upon future earnings, capital requirements, financial condition and other
factors. Our credit agreement prohibits us from making cash distributions if any potential default or event of default, as defined in
the credit agreement, occurs or would result from the cash distribution. The indentures governing our outstanding senior notes and
our partnership agreement also limit our ability to make distributions to our common unitholders in certain circumstances.
Within 45 days after the end of each quarter, we will distribute all of our Available Cash (as defined in our partnership
agreement) to common unitholders of record on the applicable record date. The amount of Available Cash is all cash on hand on
the date of determination of Available Cash for the quarter, less the amount of cash reserves established by our general partner to
provide for the proper conduct of our businesses, to comply with applicable law, any of our debt instruments or other agreements,
or to provide funds for distributions to unitholders and our general partner for any one or more of the next four quarters.
We will make distributions of Available Cash from distributable cash flow for any quarter in the following manner:
99.33% to the common unitholders, pro rata, and 0.67% to the general partner, until we distribute for each outstanding common
unit an amount equal to the minimum quarterly distribution for that quarter; and thereafter, cash in excess of the minimum
quarterly distribution is distributed to the common unitholders and the general partner based on the percentages as provided
below.
As holder of the incentive distribution rights, the general partner is entitled to incentive distributions if the amount we
distribute with respect to any quarter exceeds specified target levels shown below:
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Series A Preferred Units
Total Quarterly Distribution
Target Amount
up to $0.4625
above $0.4625 up to $0.5375
above $0.5375 up to $0.6625
above $0.6625
Marginal Percentage
Interest in Distributions
Unitholders
General Partner
99.33 %
86.33 %
76.33 %
51.33 %
0.67 %
13.67 %
23.67 %
48.67 %
On August 7, 2018, we issued 2,760,000 of our Series A Preferred Units at a price of $25.00 per Series A Preferred Unit.
We used the proceeds, net of underwriting discount and expenses, of $66.4 million to reduce indebtedness under our credit
agreement.
Distributions on the Series A Preferred Units are cumulative from August 7, 2018, the original issue date of the Series A
Preferred Units, and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each
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year, commencing on November 15, 2018 (each, a “Distribution Payment Date”), to holders of record as of the opening of
business on the February 1, May 1, August 1 or November 1 next preceding the Distribution Payment Date, in each case, when,
as, and if declared by the General Partner out of legally available funds for such purpose. Distributions on the Series A Preferred
Units will be paid out of Available Cash with respect to the quarter immediately preceding the applicable Distribution Payment
Date.
No distribution may be declared or paid or set apart for payment on any junior securities (other than a distribution
payable solely in junior securities) unless full cumulative distributions have been or contemporaneously are being paid or
provided for on all outstanding Series A Preferred Units and any parity securities through the most recent respective distribution
periods.
The initial distribution rate for the Series A Preferred Units from and including the Original Issue Date, but excluding,
August 15, 2023 is 9.75% per annum of the $25.00 liquidation preference per Series A Preferred Unit (equal to $2.4375 per
Series A Preferred Unit per annum). On and after August 15, 2023, distributions on the Series A Preferred Units will accumulate
for each distribution period at a percentage of the $25.00 liquidation preference equal to an annual floating rate of the three-month
LIBOR plus a spread of 6.774% per annum.
Equity Compensation Plan
The equity compensation plan information required by Item 201(d) of Regulation S‑K in response to this item is
incorporated by reference from Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters—Equity Compensation Plan Table.”
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
We did not repurchase any of our common units during the quarter ended December 31, 2019.
Item 6. Selected Financial Data.
The following table presents selected historical financial and operating data of Global Partners LP for the years and as of
the dates indicated. The selected historical financial data is derived from the historical consolidated financial statements of Global
Partners LP.
This table should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and the historical consolidated financial statements of Global Partners LP and the notes
thereto included elsewhere in this report. In addition, this table presents non‑GAAP financial measures which we use in our
businesses. These measures are not calculated or presented in accordance with generally accepted accounting principles in the
United States (“GAAP”). We explain these measures and present reconciliations to the most directly comparable financial
measures calculated in accordance with GAAP in Part II, Item 7, “Management’s
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Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Key Performance
Indicators.”
Statement of Income Data:
Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating expenses
(Gain) loss on trustee taxes
Lease exit and termination (gain) expenses
Amortization expense
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Total operating costs and expenses
Operating income (loss)
Interest expense
Loss on early extinguishment of debt
Income (loss) before income tax (expense) benefit
Income tax (expense) benefit
Net income (loss)
Net loss attributable to noncontrolling interest (1)
Net income (loss) attributable to Global Partners LP
Less: General partners’ interest in net income (loss)
Less: Series A preferred limited partner interest in net income
Net income (loss) attributable to common limited partners
Per Unit Data
Basic net income (loss) per common limited partner unit (2)
Diluted net income (loss) per common limited partner unit (2)
Cash distributions per common limited partner unit (3)
Cash Flow Data:
Net cash provided by (used in):
Operating activities
Investment activities
Financing activities
Other Financial Data:
EBITDA (4)
Adjusted EBITDA (4)
Distributable cash flow (5)
Capital expenditures—acquisitions (6)
Capital expenditures—maintenance and expansion (6)
Operating Data:
Normal heating degree days (7)
Actual heating degree days
Variance from normal heating degree days
Variance from prior year actual degree days
Total gallons sold (in millions)
Variance in volume sold from prior year
Balance Sheet Data (at period end):
Total assets
Long—term debt
Total debt
Total liabilities
Partners’ equity
The above table reflects certain rounding conventions.
2019
Year Ended December 31,
2017
(dollars in millions except per unit amounts)
2018
2016
$ 13,081.7
12,419.0
662.7
170.9
342.4
—
(0.5)
11.4
(2.7)
2.0
523.5
139.2
(89.9)
(13.1)
36.2
(1.0)
35.2
0.7
35.9
1.4
6.7
27.8
$
$ 12,672.6
12,022.2
650.4
171.0
321.1
(52.6)
(3.5)
11.0
5.9
0.4
453.3
197.1
(89.1)
—
108.0
(5.6)
102.4
1.5
103.9
1.0
2.7
100.2
$
$ 8,920.6
8,337.5
583.1
155.0
283.6
16.2
—
9.2
(1.6)
0.8
463.3
119.8
(86.2)
—
33.5
23.6
57.1
1.6
58.8
0.4
—
58.4
$
$ 8,239.6
7,693.1
546.5
149.7
288.5
—
80.7
9.4
20.5
149.9
698.7
(152.2)
(86.3)
—
(238.5)
(0.1)
(238.6)
39.2
(199.4)
(1.3)
—
$ (198.1)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
0.82
0.81
2.05
94.4
(67.2)
(23.3)
234.4
233.7
95.7
—
82.9
5,630
5,152
2.97
2.95
1.88
$
$
$
1.74
1.74
1.85
$
$
$
(5.91)
(5.91)
1.85
168.9
(225.7)
50.1
$ 348.4
$
(61.6)
$ (282.0)
$ (119.9)
$
6.4
$ 122.4
304.3
310.6
173.7
171.6
69.2
5,630
5,391
$ 225.0
$ 224.2
$ 108.3
38.5
$
49.8
$
$
(4.9)
$ 129.7
$ (121.4)
—
$
71.3
$
5,630
5,310
5,661
5,177
2015
$ 10,314.9
9,717.2
597.7
177.0
290.3
—
—
13.5
2.1
—
482.9
114.7
(73.3)
—
41.4
1.9
43.3
0.3
43.6
7.7
—
35.9
$
$
$
$
$
$
$
$
$
$
$
$
1.12
1.11
2.74
62.5
(649.7)
583.1
225.7
227.8
126.9
561.2
92.9
(8)%
(4)%
(4)%
2 %
(6)%
3 %
(9)%
(8)%
6,519
5,863
4,766
11 %
23 %
(7)%
5,133
(9)%
5,630
5,651
0.37 %
(0.23)%
5,648
(11)%
$ 2,808.4
$ 1,058.2
$ 1,207.1
$ 2,349.2
459.2
$
$ 2,424.3
$ 1,034.5
$ 1,137.8
$ 1,925.1
499.2
$
$ 2,320.2
$ 957.8
$ 1,084.5
$ 1,925.9
$ 394.3
$ 2,564.0
$ 1,025.9
$ 1,300.5
$ 2,166.2
$ 397.8
$ 2,663.7
$ 1,075.6
$ 1,173.7
$ 1,969.7
694.0
$
(1) On February 1, 2013, we acquired a 60% membership interest in Basin Transload, LLC (“Basin Transload”). The net loss in
the table above is attributable to the noncontrolling interest which represents Basin Transload’s 40% interest.
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(2) See Note 2 of Notes to Consolidated Financial Statements included elsewhere in this report for net income (loss) per
common limited partner unit calculation.
(3) Cash distributions earned in one calendar quarter are paid in the following calendar quarter. This amount is based on cash
distributions paid during each respective year. See Note 18 of Notes to Consolidated Financial Statements included
elsewhere in this report.
(4) Earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA, which is EBITDA
adjusted for gains or losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges, are
non‑GAAP financial measures which are discussed under “Results of Operations—Evaluating Our Results of Operations”
and reconciled to the most directly comparable GAAP financial measures under “Results of Operations—Key Performance
Indicators” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In
2016, Adjusted EBITDA includes lease exit and termination expenses of $80.7 million which were recorded as a result of
our December 2016 voluntary early termination of a sublease for 1,610 railcars. Excluding these expenses, Adjusted
EBITDA would have been $210.4 million for 2016.
(5) Distributable cash flow is a non‑GAAP financial measure which is discussed under “Results of Operations—Evaluating Our
Results of Operations” and reconciled to its most directly comparable GAAP financial measures under “Results of
Operations—Key Performance Indicators” in Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” As defined by our partnership agreement, distributable cash flow is not adjusted for
certain non-cash items, such as net losses on the sale and disposition of assets and goodwill and long-lived asset impairment
charges. In 2016, distributable cash flow includes a net loss on sale and disposition of assets of $20.5 million, a net goodwill
and long-lived asset impairment of $114.1 million ($149.9 million, offset by $35.8 million attributed to the noncontrolling
interest) and lease exit and termination expenses of $80.7 million. Excluding these charges, distributable cash flow would
have been $93.9 million in 2016.
(6) Capital expenditures are discussed under “Liquidity and Capital Resources” in Part II, Item 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.”
(7) Degree days is an industry measurement of temperature designed to evaluate energy demand and consumption which is
further discussed under “Results of Operations—Evaluating Our Results of Operations” in Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations of Global Partners LP should be
read in conjunction with the historical consolidated financial statements of Global Partners LP and the notes thereto included
elsewhere in this report.
Overview
General
We are a master limited partnership formed in March 2005. We own, control or have access to one of the largest
terminal networks of refined petroleum products and renewable fuels in Massachusetts, Maine, Connecticut, Vermont, New
Hampshire, Rhode Island, New York, New Jersey and Pennsylvania (collectively, the “Northeast”). We are one of the region’s
largest independent owners, suppliers and operators of gasoline stations and convenience stores. As of December 31, 2019, we
had a portfolio of 1,551 owned, leased and/or supplied gasoline stations, including 289 directly operated convenience stores,
primarily in the Northeast. We are also one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to
wholesalers, retailers and commercial customers in the New England states and New York. We engage in the purchasing, selling,
gathering, blending, storing and logistics of transporting petroleum and related products, including gasoline and gasoline
blendstocks (such as ethanol), distillates (such as home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil
and propane and in the transportation of petroleum products and renewable fuels by rail from the mid‑continent region of the
United States and Canada.
Collectively, we sold approximately $12.6 billion of refined petroleum products, gasoline blendstocks, renewable fuels,
crude oil and propane for the year ended December 31, 2019. In addition, we had other revenues of approximately $0.5 billion for
the year ended December 31, 2019 from convenience store sales at our directly operated stores, rental income from dealer leased
and commissioned agent leased gasoline stations and from cobranding arrangements, and sundries.
We base our pricing on spot prices, fixed prices or indexed prices and routinely use the New York Mercantile Exchange
(“NYMEX”), Chicago Mercantile Exchange (“CME”) and Intercontinental Exchange (“ICE”) or other counterparties to hedge the
risk inherent in buying and selling commodities. Through the use of regulated exchanges or derivatives, we seek to maintain a
position that is substantially balanced between purchased volumes and sales volumes or future delivery obligations.
2019 and Recent Events
2027 Notes Offering and 2022 Notes Tender Offer and Redemption— On July 31, 2019, we and GLP Finance Corp. (the
“Issuers”) issued $400.0 million aggregate principal amount of 7.00% senior notes due 2027 (the “2027 Notes”) to several initial
purchasers (the “2027 Notes Initial Purchasers”) in a private placement exempt from the registration requirements under the
Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes were resold by the 2027 Notes Initial Purchasers to
qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to
Regulation S under the Securities Act. We used the net proceeds from the offering to fund the repurchase of our 6.25% senior
notes due 2022 (the “2022 Notes”) in a tender offer and to repay a portion of the borrowings outstanding under our credit
agreement. The redemption of the 2022 Notes occurred on August 30, 2019. Please read “—Liquidity and Capital Resources—
Senior Notes” for additional information.
On February 18, 2020, we completed an exchange offer whereby holders of the 2027 Notes exchanged all of the 2027
Notes for an equivalent amount of senior notes registered under the Securities Act. The exchange notes are substantially identical
to the 2027 Notes, except that the exchange notes are not subject to the restrictions on transfers or to any increase in annual
interest rates for failure to comply with the 2027 Notes Registration Rights Agreement (defined below).
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Amended Credit Agreement— On April 19, 2019, we entered into the third amendment to the third amended and restated
credit agreement which, among other things, extended the maturity date from April 30, 2020 to April 29, 2022 and reduced by
0.25% the applicable rate under the existing revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans
and cost of funds rate loans and for issuances of letters of credit. Please read “—Liquidity and Capital Resources—Credit
Agreement” for additional information on our credit agreement.
2018 Events
Series A Preferred Unit Offering—On August 7, 2018, we issued 2,760,000 9.75% Series A Fixed-to-Floating Rate
Cumulative Redeemable Perpetual Preferred Units representing limited partner interests (the “Series A Preferred Units”) for
$25.00 per Series A Preferred Unit in an offering registered under the Securities Act of 1933. We used the proceeds, net of
underwriting discount and expenses, of $66.4 million to reduce indebtedness under our credit agreement. See Note 18 of Notes to
Consolidated Financial Statements for additional information.
Acquisition from Cheshire Oil Company, LLC—On July 24, 2018, we acquired the assets of ten company-operated
gasoline stations and convenience stores from New Hampshire-based Cheshire Oil Company, LLC (“Cheshire”) for
approximately $33.4 million, including inventory. See Note 20 of Notes to Consolidated Financial Statements for additional
information.
Acquisition from Champlain Oil Company, Inc.—On July 17, 2018, we acquired retail fuel and convenience store assets
from Vermont-based Champlain Oil Company, Inc. (“Champlain”) for approximately $138.2 million, including inventory. The
acquisition included 37 company-operated gasoline stations with Jiffy Mart-branded convenience stores in Vermont and New
Hampshire and approximately 24 fuel sites that are either owned or leased, including lessee dealer and commission agent
locations. The transaction also included fuel supply agreements for approximately 65 gasoline stations, primarily in Vermont and
New Hampshire. See Note 20 of Notes to Consolidated Financial Statements for additional information.
Volumetric Ethanol Excise Tax Credit—In the first quarter of 2018, we recognized a one-time income item of
approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise
Tax Credit, which tax credit program expired in 2011. Based upon the significant passage of time from that 2011 expiration date,
including underlying statutes of limitation, as of January 31, 2018 we determined that the liability was no longer required. The
recognition of this one-time income item, which is included in (gain) loss on trustee taxes in the accompanying consolidated
statements of operations for the year months ended December 31, 2018, did not impact cash flows from operations for the year
ended December 31, 2018.
2017 Events
Acquisition of Gasoline and Convenience Store Assets—On October 18, 2017, we completed the acquisition of retail
gasoline and convenience store assets from Honey Farms, Inc. (“Honey Farms”) for approximately $38.5 million in a cash
transaction. The acquisition included 11 company-operated retail sites with gasoline and convenience stores and 22 company-
operated stand-alone convenience stores. All of the sites are located in the greater Worcester, Massachusetts area. See Note 20 of
Notes to Consolidated Financial Statements for additional information.
Sale of Natural Gas and Electricity Brokerage Businesses—On February 1, 2017, we completed the sale of our natural
gas marketing and electricity brokerage businesses for a purchase price of approximately $17.3 million, subject to customary
closing adjustments. Proceeds from the sale amounted to approximately $16.3 million, and we realized a gain on the sale of
$14.2 million. Prior to the sale, the results of the natural gas marketing and electricity brokerage businesses were included in the
Commercial segment.
Operating Segments
We purchase refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane primarily from
domestic and foreign refiners and ethanol producers, crude oil producers, major and independent oil
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companies and trading companies. We operate our businesses under three segments: (i) Wholesale, (ii) Gasoline Distribution and
Station Operations (“GDSO”) and (iii) Commercial.
Wholesale
In our Wholesale segment, we engage in the logistics of selling, gathering, blending, storing and transporting refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We transport these products by railcars, barges,
trucks and/or pipelines pursuant to spot or long-term contracts. From time to time, we aggregate crude oil by truck or pipeline in
the mid-continent region of the United States and Canada, transport it by rail and ship it by barge to refiners. We sell home
heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene, residual oil and propane to home heating
oil and propane retailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to take
delivery of the gasoline, distillates and propane at bulk terminals and inland storage facilities that we own or control or at which
we have throughput or exchange arrangements. Ethanol is shipped primarily by rail and by barge.
In our Wholesale segment, we obtain Renewable Identification Numbers (“RIN”) in connection with our purchase of
ethanol which is used for bulk trading purposes or for blending with gasoline through our terminal system. A RIN is a renewable
identification number associated with government‑mandated renewable fuel standards. To evidence that the required volume of
renewable fuel is blended with gasoline, obligated parties must retire sufficient RINs to cover their Renewable Volume
Obligation (“RVO”). Our U.S. Environmental Protection Agency (“EPA”) obligations relative to renewable fuel reporting are
comprised of foreign gasoline and diesel that we may import and blending operations at certain facilities.
Gasoline Distribution and Station Operations
In our GDSO segment, gasoline distribution includes sales of branded and unbranded gasoline to gasoline station
operators and sub-jobbers. Station operations include (i) convenience stores, (ii) rental income from gasoline stations leased to
dealers, from commissioned agents and from cobranding arrangements and (iii) sundries (such as car wash sales and lottery and
ATM commissions).
As of December 31, 2019, we had a portfolio of owned, leased and/or supplied gasoline stations, primarily in the
Northeast, that consisted of the following:
Company operated
Commissioned agents
Lessee dealers
Contract dealers
Total
289
258
216
788
1,551
At our company‑operated stores, we operate the gasoline stations and convenience stores with our employees, and we
set the retail price of gasoline at the station. At commissioned agent locations, we own the gasoline inventory, and we set the
retail price of gasoline at the station and pay the commissioned agent a fee related to the gallons sold. We receive rental income
from commissioned agent leased gasoline stations for the leasing of the convenience store premises, repair bays and other
businesses that may be conducted by the commissioned agent. At dealer‑leased locations, the dealer purchases gasoline from us,
and the dealer sets the retail price of gasoline at the dealer’s station. We also receive rental income from (i) dealer‑leased gasoline
stations and (ii) cobranding arrangements. We also supply gasoline to locations owned and/or leased by independent contract
dealers. Additionally, we have contractual relationships with distributors in certain New England states pursuant to which we
source and supply these distributors’ gasoline stations with ExxonMobil‑branded gasoline.
Commercial
In our Commercial segment, we include sales and deliveries to end user customers in the public sector and to large
commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and
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bunker fuel. In the case of public sector commercial and industrial end user customers, we sell products primarily either through a
competitive bidding process or through contracts of various terms. We respond to publicly issued requests for product proposals
and quotes. We generally arrange for the delivery of the product to the customer’s designated location. Our Commercial segment
also includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity.
Seasonality
Due to the nature of our businesses and our reliance, in part, on consumer travel and spending patterns, we may
experience more demand for gasoline during the late spring and summer months than during the fall and winter. Travel and
recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for
gasoline. Therefore, our volumes in gasoline are typically higher in the second and third quarters of the calendar year. As demand
for some of our refined petroleum products, specifically home heating oil and residual oil for space heating purposes, is generally
greater during the winter months, heating oil and residual oil volumes are generally higher during the first and fourth quarters of
the calendar year. These factors may result in fluctuations in our quarterly operating results.
Outlook
This section identifies certain risks and certain economic or industry‑wide factors that may affect our financial
performance and results of operations in the future, both in the short‑term and in the long‑term. Our results of operations and
financial condition depend, in part, upon the following:
· Our businesses are influenced by the overall markets for refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane and increases and/or decreases in the prices of these products may
adversely impact our financial condition, results of operations and cash available for distribution to our unitholders
and the amount of borrowing available for working capital under our credit agreement. Results from our
purchasing, storing, terminalling, transporting, selling and blending operations are influenced by prices for refined
petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane, price volatility and the market for
such products. Prices in the overall markets for these products may affect our financial condition, results of
operations and cash available for distribution to our unitholders. Our margins can be significantly impacted by the
forward product pricing curve, often referred to as the futures market. We typically hedge our exposure to petroleum
product and renewable fuel price moves with futures contracts and, to a lesser extent, swaps. In markets where
future prices are higher than current prices, referred to as contango, we may use our storage capacity to improve our
margins by storing products we have purchased at lower prices in the current market for delivery to customers at
higher prices in the future. In markets where future prices are lower than current prices, referred to as
backwardation, inventories can depreciate in value and hedging costs are more expensive. For this reason, in these
backward markets, we attempt to reduce our inventories in order to minimize these effects. When prices for the
products we sell rise, some of our customers may have insufficient credit to purchase supply from us at their
historical purchase volumes, and their customers, in turn, may adopt conservation measures which reduce
consumption, thereby reducing demand for product. Furthermore, when prices increase rapidly and dramatically, we
may be unable to promptly pass our additional costs on to our customers, resulting in lower margins which could
adversely affect our results of operations. Higher prices for the products we sell may (1) diminish our access to trade
credit support and/or cause it to become more expensive and (2) decrease the amount of borrowings available for
working capital under our credit agreement as a result of total available commitments, borrowing base limitations
and advance rates thereunder. When prices for the products we sell decline, our exposure to risk of loss in the event
of nonperformance by our customers of our forward contracts may be increased as they and/or their customers may
breach their contracts and purchase the products we sell at the then lower market price from a competitor.
· We commit substantial resources to pursuing acquisitions and expending capital for growth projects, although there
is no certainty that we will successfully complete any acquisitions or growth projects or receive the economic
results we anticipate from completed acquisitions or growth projects. We are
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continuously engaged in discussions with potential sellers and lessors of existing (or suitable for development)
terminalling, storage, logistics and/or marketing assets, including gasoline stations, convenience stores and related
businesses. Our growth largely depends on our ability to make accretive acquisitions and/or accretive development
projects. We may be unable to execute such accretive transactions for a number of reasons, including the following:
(1) we are unable to identify attractive transaction candidates or negotiate acceptable terms; (2) we are unable to
obtain financing for such transactions on economically acceptable terms; or (3) we are outbid by competitors. In
addition, we may consummate transactions that at the time of consummation we believe will be accretive but that
ultimately may not be accretive. If any of these events were to occur, our future growth and ability to increase or
maintain distributions on our common units could be limited. We can give no assurance that our transaction efforts
will be successful or that any such efforts will be completed on terms that are favorable to us.
·
The condition of credit markets may adversely affect our liquidity. In the past, world financial markets
experienced a severe reduction in the availability of credit. Possible negative impacts in the future could include a
decrease in the availability of borrowings under our credit agreement, increased counterparty credit risk on our
derivatives contracts and our contractual counterparties requiring us to provide collateral. In addition, we could
experience a tightening of trade credit from our suppliers.
· We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics
activities in transporting the products we sell. Implementation of regulations and directives related to these
aforementioned services as well as disruption in any of these transportation services could have an adverse effect
on our financial condition, results of operations and cash available for distribution to our unitholders. Hurricanes,
flooding and other severe weather conditions could cause a disruption in the transportation services we depend upon
and could affect the flow of service. In addition, accidents, labor disputes between providers and their employees
and labor renegotiations, including strikes, lockouts or a work stoppage, shortage of railcars, trucks and barges,
mechanical difficulties or bottlenecks and disruptions in transportation logistics could also disrupt our business
operations. These events could result in service disruptions and increased costs which could also adversely affect
our financial condition, results of operations and cash available for distribution to our unitholders. Other disruptions,
such as those due to an act of terrorism or war, could also adversely affect our businesses.
· We have contractual obligations for certain transportation assets such as railcars, barges and pipelines. A
decline in demand for (i) the products we sell or (ii) our logistics activities, could result in a decrease in the
utilization of our transportation assets, which could negatively impact our financial condition, results of operations
and cash available for distribution to our unitholders.
· Our gasoline financial results, with particular impact to our GDSO segment, are seasonal and can be lower in the
first and fourth quarters of the calendar year. Due to the nature of our businesses and our reliance, in part, on
consumer travel and spending patterns, we may experience more demand for gasoline during the late spring and
summer months than during the fall and winter. Travel and recreational activities are typically higher in these
months in the geographic areas in which we operate, increasing the demand for gasoline that we sell. Therefore, our
results of operations in gasoline can be lower in the first and fourth quarters of the calendar year.
· Our heating oil and residual oil financial results are seasonal and can be lower in the second and third quarters of
the calendar year. Demand for some refined petroleum products, specifically home heating oil and residual oil for
space heating purposes, is generally higher during November through March than during April through October. We
obtain a significant portion of these sales during the winter months. Therefore, our results of operations in heating
oil and residual oil for the first and fourth calendar quarters can be better than for the second and third quarters.
· Warmer weather conditions could adversely affect our results of operations and financial condition. Weather
conditions generally have an impact on the demand for both home heating oil and residual oil. Because we supply
distributors whose customers depend on home heating oil and residual oil for space
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heating purposes during the winter, warmer‑than‑normal temperatures during the first and fourth calendar quarters
can decrease the total volume we sell and the gross profit realized on those sales. Therefore, our results of
operations in heating oil and residual oil for the first and fourth calendar quarters can be better than for the second
and third quarters.
·
Energy efficiency, higher prices, new technology and alternative fuels could reduce demand for our
products. Higher prices and new technologies and alternative fuel sources, such as electric, hybrid or battery
powered motor vehicles, could reduce the demand for transportation fuels and adversely impact our sales of
transportation fuels. A reduction in sales of transportation fuels could have an adverse effect on our financial
condition, results of operations and cash available for distribution to our unitholders. In addition, increased
conservation and technological advances have adversely affected the demand for home heating oil and residual oil.
Consumption of residual oil has steadily declined over the last three decades. We could face additional competition
from alternative energy sources as a result of future government-mandated controls or regulations further promoting
the use of cleaner fuels. End users who are dual-fuel users have the ability to switch between residual oil and natural
gas. Other end users may elect to convert to natural gas. During a period of increasing residual oil prices relative to
the prices of natural gas, dual-fuel customers may switch and other end users may convert to natural gas. During
periods of increasing home heating oil prices relative to the price of natural gas, residential users of home heating oil
may also convert to natural gas. As described above, such switching or conversion could have an adverse effect on
our financial condition, results of operations and cash available for distribution to our unitholders.
· Changes in government usage mandates and tax credits could adversely affect the availability and pricing of
ethanol and renewable fuels, which could negatively impact our sales. The EPA has implemented a RFS pursuant
to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The RFS program seeks
to promote the incorporation of renewable fuels in the nation’s fuel supply and, to that end, sets annual quotas for
the quantity of renewable fuels (such as ethanol) that must be blended into transportation fuels consumed in the
United States. A RIN is assigned to each gallon of renewable fuel produced in or imported into the United States.
We are exposed to the volatility in the market price of RINs. We cannot predict the future prices of RINs. RIN
prices are dependent upon a variety of factors, including EPA regulations related to the amount of RINs required
and the total amounts that can be generated, the availability of RINs for purchase, the price at which RINs can be
purchased, and levels of transportation fuels produced, all of which can vary significantly from quarter to quarter. If
sufficient RINs are unavailable for purchase or if we have to pay a significantly higher price for RINs, or if we are
otherwise unable to meet the EPA’s RFS mandates, our results of operations and cash flows could be adversely
affected. Future demand for ethanol will be largely dependent upon the economic incentives to blend based upon the
relative value of gasoline and ethanol, taking into consideration the EPA’s regulations on the RFS program and
oxygenate blending requirements. A reduction or waiver of the RFS mandate or oxygenate blending requirements
could adversely affect the availability and pricing of ethanol, which in turn could adversely affect our future
gasoline and ethanol sales. In addition, changes in blending requirements or broadening the definition of what
constitutes a renewable fuel could affect the price of RINs which could impact the magnitude of the mark‑to‑market
liability recorded for the deficiency, if any, in our RIN position relative to our RVO at a point in time.
· We may not be able to fully implement or capitalize upon planned growth projects. We could have a number of
organic growth projects that may require the expenditure of significant amounts of capital in the aggregate. Many of
these projects involve numerous regulatory, environmental, commercial and legal uncertainties beyond our control.
As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed or
may be obtained with conditions that materially alter the expected return associated with the underlying projects.
Moreover, revenues associated with these organic growth projects may not increase immediately upon the
expenditures of funds with respect to a particular project and these projects may be completed behind schedule or in
excess of budgeted cost. We may pursue and complete projects in anticipation of market demand that dissipates or
market growth that never materializes. As a result of these uncertainties, the anticipated benefits associated with our
capital projects may not be achieved.
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· Governmental action and campaigns to discourage smoking may have a material adverse effect on our revenues
and gross profit. Congress has given the FDA broad authority to regulate tobacco and nicotine products, and the
FDA and states have enacted and are pursuing enaction of numerous regulations restricting the sale of such
products. These governmental actions, as well as national, state and municipal campaigns to discourage smoking,
tax increases, and imposition of regulations restricting the sale of e-cigarettes and vapor products, have and could
result in reduced consumption levels, higher costs which we may not be able to pass on to our customers, and
reduced overall customer traffic. Also, increasing regulations related to and restricting the sale of vapor products
and e-cigarettes may offset some of the gains we have experienced from selling these types of products. These
factors could materially affect the sale of this product mix which in turn could have an adverse effect on our
financial condition, results of operations and cash available for distribution to our unitholders.
· New, stricter environmental laws and other industry-related regulations or environmental litigation could
significantly impact our operations and/or increase our costs, which could adversely affect our results of operations
and financial condition. Our operations are subject to federal, state and municipal laws and regulations regulating,
among other matters, logistics activities, product quality specifications and other environmental matters. The trend
in environmental regulation has been towards more restrictions and limitations on activities that may affect the
environment over time. Our businesses may be adversely affected by increased costs and liabilities resulting from
such stricter laws and regulations. We try to anticipate future regulatory requirements that might be imposed and
plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the
costs of such compliance. Risks related to our environmental permits, including the risk of noncompliance, permit
interpretation, permit modification, renewal of permits on less favorable terms, judicial or administrative challenges
to permits by citizens groups or federal, state or municipal entities or permit revocation are inherent in the operation
of our businesses, as it is with other companies engaged in similar businesses. We may not be able to renew the
permits necessary for our operations, or we may be forced to accept terms in future permits that limit our operations
or result in additional compliance costs. In recent years, the transport of crude oil and ethanol has become subject to
additional regulation. The establishment of more stringent design or construction standards, or other requirements
for railroad tank cars that are used to transport crude oil and ethanol with too short of a timeframe for compliance
may lead to shortages of compliant railcars available to transport crude oil and ethanol, which could adversely affect
our businesses. Likewise, in recent years, efforts have commenced to seek to use federal, state and municipal laws to
contest issuance of permits, contest renewal of permits and restrict the types of railroad tanks cars that can be used
to deliver products, including, without limitation, crude oil and ethanol to bulk storage terminals. Were such laws to
come into effect and were they to survive appeals and judicial review, they would potentially expose our operations
to duplicative and possibly inconsistent regulation. There can be no assurances as to the timing and type of such
changes in existing laws or the promulgation of new laws or the amount of any required expenditures associated
therewith. Climate change continues to attract considerable public and scientific attention. In recent years
environmental interest groups have filed suit against companies in the energy industry related to climate change.
Should such suits succeed, we could face additional compliance costs or litigation risks.
Results of Operations
Evaluating Our Results of Operations
Our management uses a variety of financial and operational measurements to analyze our performance. These
measurements include: (1) product margin, (2) gross profit, (3) EBITDA and Adjusted EBITDA, (4) distributable cash flow,
(5) selling, general and administrative expenses (“SG&A”), (6) operating expenses and (7) degree days.
Product Margin
We view product margin as an important performance measure of the core profitability of our operations. We review
product margin monthly for consistency and trend analysis. We define product margin as our product sales minus
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product costs. Product sales primarily include sales of unbranded and branded gasoline, distillates, residual oil, renewable fuels,
crude oil and propane, as well as convenience store sales, gasoline station rental income and revenue generated from our logistics
activities when we engage in the storage, transloading and shipment of products owned by others. Product costs include the cost
of acquiring products and all associated costs including shipping and handling costs to bring such products to the point of sale as
well as product costs related to convenience store items and costs associated with our logistics activities. We also look at product
margin on a per unit basis (product margin divided by volume). Product margin is a non‑GAAP financial measure used by
management and external users of our consolidated financial statements to assess our business. Product margin should not be
considered an alternative to net income, operating income, cash flow from operations, or any other measure of financial
performance presented in accordance with GAAP. In addition, our product margin may not be comparable to product margin or a
similarly titled measure of other companies.
Gross Profit
We define gross profit as our product margin minus terminal and gasoline station related depreciation expense allocated
to cost of sales.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non‑GAAP financial measures used as supplemental financial measures by
management and may be used by external users of our consolidated financial statements, such as investors, commercial banks and
research analysts, to assess:
·
·
·
·
·
our compliance with certain financial covenants included in our debt agreements;
our financial performance without regard to financing methods, capital structure, income taxes or historical cost
basis;
our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;
our operating performance and return on invested capital as compared to those of other companies in the wholesale,
marketing, storing and distribution of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil
and propane, and in the gasoline stations and convenience stores business, without regard to financing methods and
capital structure; and
the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment
opportunities.
Adjusted EBITDA is EBITDA further adjusted for gains or losses on the sale and disposition of assets and goodwill and
long-lived asset impairment charges. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income,
operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in
accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income, and these
measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similarly
titled measures of other companies.
Distributable Cash Flow
Distributable cash flow is an important non‑GAAP financial measure for our limited partners since it serves as an
indicator of our success in providing a cash return on their investment. Distributable cash flow as defined by our partnership
agreement is net income plus depreciation and amortization minus maintenance capital expenditures, as well as adjustments to
eliminate items approved by the audit committee of the board of directors of our general partner that are extraordinary or non-
recurring in nature and that would otherwise increase distributable cash flow.
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Distributable cash flow as used in our partnership agreement also determines our ability to make cash distributions on
our incentive distribution rights. The investment community also uses a distributable cash flow metric similar to the metric used
in our partnership agreement with respect to publicly traded partnerships to indicate whether or not such partnerships have
generated sufficient earnings on a current or historic level that can sustain distributions on preferred or common units or support
an increase in quarterly cash distributions on common units. Our partnership agreement does not permit adjustments for certain
non-cash items, such as net losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges.
Distributable cash flow should not be considered as an alternative to net income, operating income, cash flow from
operations, or any other measure of financial performance presented in accordance with GAAP. In addition, our distributable cash
flow may not be comparable to distributable cash flow or similarly titled measures of other companies.
Selling, General and Administrative Expenses
Our SG&A expenses include, among other things, marketing costs, corporate overhead, employee salaries and benefits,
pension and 401(k) plan expenses, discretionary bonuses, non‑interest financing costs, professional fees and information
technology expenses. Employee‑related expenses including employee salaries, discretionary bonuses and related payroll taxes,
benefits, and pension and 401(k) plan expenses are paid by our general partner which, in turn, are reimbursed for these expenses
by us.
Operating Expenses
Operating expenses are costs associated with the operation of the terminals, transload facilities and gasoline stations and
convenience stores used in our businesses. Lease payments, maintenance and repair, property taxes, utilities, credit card fees,
taxes, labor and labor‑related expenses comprise the most significant portion of our operating expenses. The majority of these
expenses remains relatively stable, independent of the volumes through our system, but fluctuate slightly depending on the
activities performed during a specific period.
Degree Days
A “degree day” is an industry measurement of temperature designed to evaluate energy demand and consumption.
Degree days are based on how far the average temperature departs from a human comfort level of 65°F. Each degree of
temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one
heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a
long‑term (multi‑year) average, or normal, to see if a month or a year was warmer or cooler than usual. Degree days are officially
observed by the National Weather Service and officially archived by the National Climatic Data Center. For purposes of
evaluating our results of operations, we use the normal heating degree day amount as reported by the National Weather Service at
its Logan International Airport station in Boston, Massachusetts.
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Key Performance Indicators
The following table provides a summary of some of the key performance indicators that may be used to assess our
results of operations. These comparisons are not necessarily indicative of future results (gallons and dollars in thousands):
Net income attributable to Global Partners LP
EBITDA (1)(2)
Adjusted EBITDA (1)(2)
Distributable cash flow (3)(4)(5)
Wholesale Segment:
Volume (gallons)
Sales
Gasoline and gasoline blendstocks
Crude oil (6)
Other oils and related products (7)
Total
Product margin
Gasoline and gasoline blendstocks
Crude oil (6)
Other oils and related products (7)
Total
Gasoline Distribution and Station Operations Segment:
Volume (gallons)
Sales
Gasoline
Station operations (8)
Total
Product margin
Gasoline
Station operations (8)
Total
Commercial Segment:
Volume (gallons)
Sales
Product margin
Combined sales and product margin:
Sales
Product margin (9)
Depreciation allocated to cost of sales
Combined gross profit
GDSO portfolio as of December 31, 2019, 2018 and 2017:
Company operated
Commissioned agents
Lessee dealers
Contract dealers
Total GDSO portfolio
66
2019
35,867
234,374
233,666
95,713
Year Ended December 31,
2018
103,905
304,312
310,606
173,688
$
$
$
$
2017
58,752
225,020
224,205
108,264
$
$
$
$
$
$
$
$
4,153,831
3,620,983
2,654,551
$ 5,358,550
96,419
1,974,897
$ 7,429,866
$
$
83,982
(13,047)
51,584
122,519
1,622,122
$ 3,806,892
466,761
$ 4,273,653
$
$
374,550
225,078
599,628
743,545
$ 1,378,211
28,540
$
$
$
$
$
$
$
$
$
$
$
4,732,028
109,719
2,049,043
6,890,790
$ 2,097,811
464,234
1,725,537
$ 4,287,582
76,741
7,159
53,389
137,289
$
$
82,124
7,279
62,799
152,202
1,596,453
1,582,056
4,081,498
427,211
4,508,709
$ 3,434,581
351,876
$ 3,786,457
373,303
203,098
576,401
645,393
1,273,103
23,611
$
$
$
$
326,536
174,986
501,522
529,705
846,513
17,858
$ 13,081,730
750,687
$
(87,930)
662,757
$
$ 12,672,602
737,301
$
(86,892)
650,409
$
$ 8,920,552
671,582
$
(88,530)
583,052
$
289
258
216
788
1,551
297
259
237
786
1,579
264
267
230
694
1,455
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Weather conditions:
Normal heating degree days
Actual heating degree days
Variance from normal heating degree days
Variance from prior period actual heating degree days
2019
Year Ended December 31,
2018
2017
5,630
5,152
(8)%
(4)%
5,630
5,391
(4)%
2 %
5,630
5,310
(6)%
3 %
(1) EBITDA and Adjusted EBITDA are non‑GAAP financial measures which are discussed above under “—Evaluating Our Results of
Operations.” The table below presents reconciliations of EBITDA and Adjusted EBITDA to the most directly comparable GAAP
financial measures.
(2) EBITDA and Adjusted EBITDA in 2019 include a $13.1 million loss on the early extinguishment of debt related to the 2022 Notes (see
Note 8 of Notes to Consolidated Financial Statements). EBITDA and Adjusted EBITDA in 2018 include a one-time gain of
approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax
Credit and a lease exit and termination gain of $3.5 million (see Note 2 of Notes to Consolidated Financial Statements for additional
information on these events).
(3) Distributable cash flow is a non‑GAAP financial measure which is discussed above under “—Evaluating Our Results of Operations.”
As defined by our partnership agreement, distributable cash flow is not adjusted for certain non-cash items, such as net losses on the
sale and disposition of assets and goodwill and long-lived asset impairment charges. The table below presents reconciliations of
distributable cash flow to the most directly comparable GAAP financial measures.
(4) Distributable cash flow includes a net (gain) loss on sale and disposition of assets and long-lived asset impairment of ($0.7 million),
$6.3 million and $13.3 million in 2019, 2018 and 2017, respectively. Excluding the net (gain) loss on sale and disposition of assets and
impairment charge, distributable cash flow would have been $95.0 million, $180.0 million and $121.6 million for 2019, 2018 and
2017, respectively.
(5) Distributable cash flow in 2019 includes a $13.1 million loss on the early extinguishment of debt related to the repurchase of the 2022
Notes (see Note 8 of Notes to Consolidated Financial Statements). Distributable cash flow in 2018 includes a one-time gain of
approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax
Credit (see Note 2 of Notes to Consolidated Financial Statements). Distributable cash flow in 2017 includes a $14.2 million gain on
the sale of our natural gas marketing and electricity brokerage businesses in February 2017 (see Note 7 of Notes to Consolidated
Financial Statements).
(6) Crude oil consists of our crude oil sales and revenue from our logistics activities.
(7) Other oils and related products primarily consist of distillates, residual oil and propane.
(8) Station operations consist of convenience stores sales, rental income and sundries.
(9) Product margin is a non‑GAAP financial measure which is discussed above under “—Evaluating Our Results of Operations.” The table
above includes a reconciliation of product margin on a combined basis to gross profit, a directly comparable GAAP measure.
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The following table presents reconciliations of EBITDA and Adjusted EBITDA to the most directly comparable GAAP
financial measures on a historical basis (in thousands):
Year Ended December 31,
2018
2017
2019
Reconciliation of net income to EBITDA and Adjusted EBITDA:
Net income
Net loss attributable to noncontrolling interest
Net income attributable to Global Partners LP
Depreciation and amortization, excluding the impact of noncontrolling interest
Interest expense, excluding the impact of noncontrolling interest
Income tax expense (benefit)
EBITDA (1)
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Adjusted EBITDA (1)
Reconciliation of net cash provided by operating activities to EBITDA and Adjusted
EBITDA:
Net cash provided by operating activities
Net changes in operating assets and liabilities and certain non-cash items
Net cash from operating activities and changes in operating assets and liabilities attributable
to noncontrolling interest
Interest expense, excluding the impact of noncontrolling interest
Income tax expense (benefit)
EBITDA (1)
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Adjusted EBITDA (1)
$
35,178 $ 102,403 $
689
35,867
107,557
89,856
1,094
234,374
(2,730)
2,022
57,117
1,635
58,752
103,601
86,230
(23,563)
225,020
(1,624)
809
$ 233,666 $ 310,606 $ 224,205
1,502
103,905
105,639
89,145
5,623
304,312
5,880
414
$
94,402 $ 168,856 $ 348,442
(185,673)
40,385
48,968
54
89,856
1,094
234,374
(2,730)
2,022
(416)
86,230
(23,563)
225,020
(1,624)
809
$ 233,666 $ 310,606 $ 224,205
303
89,145
5,623
304,312
5,880
414
(1) EBITDA and Adjusted EBITDA in 2019 include a $13.1 million loss on the early extinguishment of debt related to the 2022 Notes (see
Note 8 of Notes to Consolidated Financial Statements). EBITDA and Adjusted EBITDA in 2018 includes a one-time gain of
approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax
Credit and a lease exit and termination gain of $3.5 million (see Note 2 of Notes to Consolidated Financial Statements for additional
information on these events).
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The following table presents reconciliations of distributable cash flow to the most directly comparable GAAP financial
measures on a historical basis (in thousands):
Year Ended December 31,
2018
2017
2019
Reconciliation of net income to distributable cash flow:
Net income
Net loss attributable to noncontrolling interest
Net income attributable to Global Partners LP
Depreciation and amortization, excluding the impact of noncontrolling interest
Amortization of deferred financing fees and senior notes discount
Amortization of routine bank refinancing fees
Non-cash tax reform benefit
Maintenance capital expenditures, excluding the impact of noncontrolling interest
Distributable cash flow (1)(2)(3)
Distributions to Series A preferred unitholders (4)
Distributable cash flow after distributions to Series A preferred unitholders
$
35,178 $ 102,403 $
57,117
1,635
1,502
689
58,752
103,905
35,867
103,601
105,639
107,557
7,089
6,873
5,940
(4,277)
(4,088)
(3,754)
(22,183)
—
—
(34,718)
(38,641)
(49,897)
108,264
173,688
95,713
(6,728)
—
(2,691)
88,985 $ 170,997 $ 108,264
$
Reconciliation of net cash provided by operating activities to distributable cash flow:
Net cash provided by operating activities
Net changes in operating assets and liabilities and certain non-cash items
Net cash from operating activities and changes in operating assets and liabilities attributable
to noncontrolling interest
Amortization of deferred financing fees and senior notes discount
Amortization of routine bank refinancing fees
Non-cash tax reform benefit
Maintenance capital expenditures, excluding the impact of noncontrolling interest
Distributable cash flow (1)(2)(3)
Distributions to Series A preferred unitholders (4)
Distributable cash flow after distributions to Series A preferred unitholders
$
94,402 $ 168,856 $ 348,442
(185,673)
40,385
48,968
(416)
303
54
7,089
6,873
5,940
(4,277)
(4,088)
(3,754)
(22,183)
—
—
(34,718)
(38,641)
(49,897)
108,264
173,688
95,713
(6,728)
—
(2,691)
88,985 $ 170,997 $ 108,264
$
(1) Distributable cash flow is a non-GAAP financial measure which is discussed above under “—Evaluating Our Results of Operations.”
As defined by our partnership agreement, distributable cash flow is not adjusted for certain non-cash items, such as net losses on the
sale and disposition of assets and goodwill and long-lived asset impairment charges.
(2) Distributable cash flow includes a net (gain) loss on sale and disposition of assets and long-lived asset impairment of ($0.7 million),
$6.3 million and $13.3 million in 2019, 2018 and 2017, respectively. Excluding the net (gain) loss on sale and disposition of assets and
impairment charge, distributable cash flow would have been $95.0 million, $180.0 million and $121.6 million for 2019, 2018 and 2017,
respectively.
(3) Distributable cash flow in 2019 includes a $13.1 million loss on the early extinguishment of debt related to the repurchase of the 2022
Notes (see Note 8 of Notes to Consolidated Financial Statements). Distributable cash flow in 2018 includes a one-time gain of
approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax
Credit (see Note 2 of Notes to Consolidated Financial Statements). Distributable cash flow in 2017 includes a $14.2 million gain on the
sale of our natural gas marketing and electricity brokerage businesses in February 2017 (see Note 7 of Notes to Consolidated Financial
Statements.
(4) Distributions to Series A preferred unitholders represent the distributions earned by the preferred unitholders during the period.
Distributions on the Series A Preferred Units are cumulative and payable quarterly in arrears on February 15, May 15, August 15 and
November 15 of each year, commencing on November 15, 2018.
Results of Operations for Years 2019, 2018 and 2017
Consolidated Sales
Our total sales were $13.1 billion and $12.7 billion for 2019 and 2018, respectively, an increase of $0.4 billion, or 3%,
due to an increase in volume sold. Our aggregate volume of product sold was 6.5 billion gallons and 5.8 billion gallons for 2019
and 2018, respectively, an increase of 0.7 billion gallons. The increase in volume sold includes increases of 533 million gallons in
our Wholesale segment, primarily in gasoline and gasoline blendstocks, 98 million gallons in our Commercial segment and
26 million gallons in our GDSO segment.
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Our total sales were $12.7 billion and $8.9 billion for 2018 and 2017, respectively, an increase of $3.8 billion, or 42%,
due to increases in prices and in volume sold. Our aggregate volume of product sold was 5.8 billion gallons and 4.7 billion
gallons for 2018 and 2017, respectively an increase of 1.1 billion gallons. The increase in volume sold includes an increase of
966 million gallons in our Wholesale segment, reflecting an increase in gasoline and gasoline blendstocks offset by declines in
volume sold in crude oil and distillates, and increases of 116 million gallons in our Commercial segment and 14 million gallons in
our GDSO segment.
Gross Profit
Our gross profit was $662.7 million and $650.4 million for 2019 and 2018, respectively, an increase of $12.3 million, or
2%, primarily due to the acquisitions of Champlain and Cheshire in July 2018 (collectively the “2018 Acquisitions”) in our
GDSO segment. The increase in gross profit was offset by a decline in crude oil product margin in our Wholesale segment,
primarily due to $21.6 million in revenue recognized in 2018 related to a take-or-pay contract with one particular customer which
was not recognized in 2019 as that contract expired in June 2018.
Our gross profit was $650.4 million and $583.1 million for 2018 and 2017, respectively, an increase of $67.3 million, or
12%, primarily due to the 2018 Acquisitions and the October 2017 acquisition of Honey Farms and to higher fuel margins in our
GDSO segment, largely in the fourth quarter. The increase in gross profit was partially offset by less favorable market conditions
in our Wholesale segment, primarily in gasoline and distillates.
Results for Wholesale Segment
Gasoline and Gasoline Blendstocks. Sales from wholesale gasoline and gasoline blendstocks were $5.3 billion and
$4.7 billion for 2019 and 2018, respectively, an increase of $0.6 billion, or 13%, due to an increase in volume sold. Our gasoline
and gasoline blendstocks product margin was $84.0 million and $76.7 million for 2019 and 2018, respectively, an increase of
$7.3 million, or 9%, primarily due to more favorable market conditions in gasoline, offset by less favorable market conditions in
gasoline blendstocks, primarily ethanol.
Sales from wholesale gasoline and gasoline blendstocks were $4.7 billion and $2.1 billion for 2018 and 2017,
respectively, an increase of $2.6 billion, or 126%, due to increases in prices and in volume sold, primarily in gasoline. Our
gasoline and gasoline blendstocks product margin was $76.7 million and $82.1 million for 2018 and 2017, respectively, a
decrease of $5.4 million, or 7%, primarily due to less favorable market conditions in gasoline, offset by improved margins in
gasoline blendstocks, primarily ethanol, due to more favorable market conditions. Our product margin in 2017 benefited from
weather-related supply disruptions in the third quarter of 2017 that did not occur in 2018.
Crude Oil. Crude oil sales and logistics revenues were $96.4 million and $109.7 million for 2019 and 2018,
respectively, a decrease of $13.3 million, or 12%, primarily due to the $21.6 million decrease in take-or-pay contract revenue,
partially offset by an increase in volume sold. Our crude oil product margin was ($13.0 million) and $7.2 million for 2019 and
2018, respectively, a decrease of $20.2 million, or 282%, primarily due to the $21.6 million decrease in take-or-pay contract
revenue. Our product margin for 2019 was favorably impacted by lower railcar related expenses.
Crude oil sales and logistics revenues were $109.7 million and $464.2 million for 2018 and 2017, respectively, a
decrease of $354.5 million, or 76%, due to a decline in volume sold as crude by rail differentials continued to be challenged. Our
crude oil product margin was $7.2 million and $7.3 million for 2018 and 2017, respectively, a decrease of $0.1 million, or 1%,
primarily due to lower contract revenue, partially offset by lower pipeline related expense, lower railcar lease and related
expenses and lower terminal lease expense associated with the expiration of a terminal lease in the fourth quarter of 2017. Our
product margin for 2017 was positively impacted by $43.2 million in revenue recognized related to a take-or-pay contract with
one particular customer compared to $21.6 million in revenue recognized in 2018 due to the expiration of that contract in June
2018. Our product margin for 2017 was negatively impacted by a $13.1 million expense associated with the acceleration and
corresponding termination of a contractual obligation under a pipeline connection agreement with Tesoro related to the Beulah,
North Dakota facility.
Other Oils and Related Products. Sales from other oils and related products (primarily distillates, residual oil
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and propane) were $2.0 billion and $2.1 billion for 2019 and 2018, respectively, a decrease of $0.1 billion, or 4%, in part due to a
decline in prices, partially offset by an increase in residual oil volume sold. Our product margin from other oils and related
products was $51.6 million and $53.4 million for 2019 and 2018, respectively, a decrease of $1.8 million, or 3%. 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.
Sales from other oils and related products were $2.1 billion and $1.7 billion for 2018 and 2017, respectively, increasing
by $323.5 million, or 19%, due to an increase in prices, partially offset by a decline in distillate volume sold. Our product margin
from other oils and related products was $53.4 million and $62.8 million for 2018 and 2017, respectively, a decrease of
$9.4 million, or 15%, primarily due to less favorable market conditions in distillates in the first and third quarters of 2018, offset
by improved margins in distillates in the fourth quarter. Our product margin in other oils and related products for both 2018 and
2017 were negatively impacted due to warmer than normal temperatures.
Results for Gasoline Distribution and Station Operations Segment
Gasoline Distribution. Sales from gasoline distribution were $3.8 billion and $4.1 billion for 2019 and 2018,
respectively, a decrease of $0.3 billion, or 7%, due to a decline in prices, partially offset by an increase in volume sold. Our
product margin from gasoline distribution was $374.5 million and $373.3 million for 2019 and 2018, respectively, an increase of
$1.2 million, primarily due to the 2018 Acquisitions. Our product margin in 2019 was negatively impacted by lower fuel margins
(cents per gallon) in the fourth quarter compared to the fourth quarter of 2018 when fuel margins were higher due to a decline in
wholesale gasoline prices.
Sales from gasoline distribution were $4.1 billion and $3.4 billion for 2018 and 2017, respectively, an increase of
$0.7 billion, or 19%, primarily due to an increase in prices for most of 2018 and to an increase in volume sold due to the 2018
Acquisitions. Our product margin from gasoline distribution was $373.3 million and $326.5 million for 2018 and 2017,
respectively, an increase of $46.8 million, or 14%, primarily due to higher fuel margins as wholesale gasoline prices declined
during the fourth quarter of 2018 and to the 2018 Acquisitions. Our product margin for 2018 was negatively impacted by rising
wholesale gasoline prices during the first six months of the year. Rising wholesale gasoline prices typically compress our
gasoline product margin and declining wholesale gasoline prices typically improve our gasoline product margin, the extent of
which depends on the magnitude and duration.
Station Operations. Our station operations, which include (i) convenience stores sales at our directly operated stores,
(ii) rental income from gasoline stations leased to dealers or from commissioned agents and from cobranding arrangements and
(iii) sale of sundries, such as car wash sales and lottery and ATM commissions, collectively generated revenues of $466.7 million
and $427.2 million for 2019 and 2018, respectively, an increase of $39.5 million, or 9%. Our product margin from station
operations was $225.1 million and $203.1 million for 2019 and 2018, respectively, an increase of $22.0 million, or 11%,
primarily due to the 2018 Acquisitions.
Revenues from our station operations were $427.2 million and $351.9 million for 2018 and 2017, respectively, an
increase of $75.3 million, or 21%. Our product margin from station operations was $203.1 million and $175.0 million for 2018
and 2017, respectively, an increase of $28.1 million, or 16%. The increases in sales and product margin are primarily due to the
2018 Acquisitions, partially offset by the sale of non-strategic sites.
Results for Commercial Segment
Our commercial sales were $1.4 billion and $1.3 billion for 2019 and 2018, respectively, an increase of $0.1 billion, or
8%, due to an increase in volume sold. Our commercial product margin was $28.5 million and $23.6 million for 2019 and 2018,
respectively, an increase of $4.9 million, or 21%, primarily due to favorable market conditions in bunkering.
Our commercial sales were $1.3 billion and $0.8 billion for 2018 and 2017, respectively, increasing by $426.6 million,
or 50%, due to increases in prices and in volume sold. Our commercial product margin was $23.6 million and $17.9 million for
2018 and 2017, respectively, an increase of $5.7 million, or 32%, primarily due to an
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increase in bunkering activity.
Selling, General and Administrative Expenses
SG&A expenses were $170.9 million and $171.0 million for 2019 and 2018, respectively, a decrease of $0.1 million, or
less than 1%, including decreases of $4.6 million in incentive compensation and $3.9 million in acquisition costs recorded in 2018
that were not incurred in 2019, offset by increases of $5.6 million in wages and $2.1 million in benefits in part to support our
GDSO business, including the 2018 Acquisitions, and $0.7 million in various SG&A expenses.
SG&A expenses were $171.0 million and $155.0 million for 2018 and 2017, respectively, an increase of $16.0 million,
or 10%, including increases of $4.6 million in incentive compensation, $3.2 million in acquisition costs, $2.1 million in wages
and benefits, $1.2 million in license fees, $1.1 million in depreciation, $0.9 million in bad debt expense and $2.9 million in
various SG&A expenses. The increase in acquisitions costs consists of $3.9 million incurred in 2018 related to Champlain and
Cheshire compared to $0.7 million incurred in 2017 related to Honey Farms.
Operating Expenses
Operating expenses were $342.4 million and $321.1 million for 2019 and 2018, respectively, an increase of
$21.3 million, or 7%, due to an increase of $21.9 million associated with our GDSO operations, primarily due to the 2018
Acquisitions, partially offset by decreases in expenses associated with our terminal operations and with the sale of sites.
Operating expenses were $321.1 million and $283.6 million for 2018 and 2017, respectively, an increase of
$37.5 million, or 13%, primarily due to an increase of $35.5 million associated with our GDSO operations, due largely to the
2018 Acquisitions and to increases in credit card fees, partially offset by a decrease in expenses due to the sale of sites. Operating
expenses associated with our terminal operations increased by $2.0 million.
Gain (loss) on Trustee Taxes
In 2018, we recognized a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent
liability related to the Volumetric Ethanol Excise Tax Credit, which tax credit program expired in 2011. Based upon the
significant passage of time from that 2011 expiration date, including underlying statutes of limitation, as of January 31, 2018 we
determined that the liability was no longer required.
In 2017, we recognized a loss on trustee taxes of $16.2 million related to an administratively closed New York State tax
audit of our fuel and sales tax returns for the periods between December 2008 through August 2013.
See Note 2 of Notes to Consolidated Financial Statements, “Summary of Significant Accounting Policies—Trustee
Taxes” for additional information.
Lease Exit and Termination Gain
In December 2016, we voluntarily terminated early a sublease with a counterparty for 1,610 railcars that were
underutilized due to unfavorable market conditions in the crude oil by rail market. Separately, we entered into a fleet management
services agreement (effective January 1, 2017) (the “Services Agreement”) with the counterparty, pursuant to which we would
provide railcar storage, freight, insurance and other services on behalf of the counterparty. During each of 2019 and 2018, we
were released from certain of our obligations under the Services Agreement, which resulted in a reduction of the remaining
accrued incremental costs of $0.5 million and $3.5 million for the years ended December 31, 2019 and 2018, respectively, which
benefit is included in lease exit and termination gain in the accompanying statements of operations.
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Amortization Expense
Amortization expense related to our intangible assets was $11.4 million, $11.0 million and $9.2 million for 2019, 2018
and 2017, respectively. The increases of $0.4 million in 2019 compared to 2018 and $1.8 million in 2018 compared to 2017 was
primarily due to the intangibles acquired in the 2018 Acquisitions.
Net Gain (Loss) on Sale and Disposition of Assets
We had a net gain (loss) on the sale and disposition of assets of $2.7 million, ($5.9 million) and ($12.5 million) for
2019, 2018 and 2017, respectively, primarily due to the sale of GDSO sites. Included in the net gain (loss) on sale and disposition
of assets is approximately $2.9 million, $3.9 million and $4.0 million for 2019, 2018 and 2017, respectively, of goodwill
derecognized as part of the site divestitures. For 2017, we recorded a $14.2 million gain associated with the sale of our natural gas
marketing and electricity brokerage businesses in February 2017.
See Note 7 of Notes to Consolidated Financial Statements for additional information.
Goodwill and Long-Lived Asset Impairment
We recognized a long-lived asset impairment charge of $2.0 million, $0.4 million and $0.8 million in 2019, 2018 and
2017, respectively, relating to long-lived assets used at certain gasoline stations and convenience stores associated with our
GDSO segment. See Note 2 of Notes to Consolidated Financial Statements for a description of the facts and circumstances related
to the impairment charges.
Interest Expense
Interest expense was $89.9 million and $89.1 million for 2019 and 2018, respectively, an increase of $0.7 million, or less
than 1%, primarily due to higher interest rates for 2019 compared to 2018, partially offset by lower average balances on our credit
facilities.
Interest expense was $89.1 million and $86.2 million for 2018 and 2017, respectively, an increase of $2.9 million, or
3%, primarily due to higher average balances on our credit facilities for 2018, in part due to the 2018 Acquisitions, an increase in
inventory attributable to both volume and price, and an increase in interest rates for 2018 compared to 2017.
Loss on Early Extinguishment of Debt
As a result of the repurchase of the 2022 Notes, we recorded a $13.1 million loss from early extinguishment of debt for
the year ended December 31, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-off of
remaining unamortized original issue discount and deferred financing fees. Please read “—Liquidity and Capital Resources—
Senior Notes” for additional information.
Income Tax (Expense) Benefit
Income tax (expense) benefit was ($1.0 million), ($5.6 million) and $23.6 million for 2019, 2018 and 2017,
respectively. The income tax (expense) benefit recognized primarily reflects the income tax (expense) benefit from the operating
results of GMG, which is a taxable entity for federal and state income tax purposes. The income tax benefit in 2017 was primarily
due to the impact of the enactment of the Tax Cuts and Jobs Act in December 2017 (“the Act”). As a result of the enactment of
this law, we remeasured certain deferred tax assets and liabilities based on the rates at which they are anticipated to reverse in the
future, resulting in a decrease to our net deferred tax liability of $22.2 million in the fourth quarter of 2017, which was recorded
based on provisional amounts. As of December 31, 2018, we completed our accounting for all of the tax effects of the enactment
of the Act, including the effects on our existing deferred tax balances and one-time transition tax. There were no material
adjustments to the provisional tax expense estimate that was previously recorded related to the Act.
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Net Loss Attributable to Noncontrolling Interest
In February 2013, we acquired a 60% membership interest in Basin Transload. The net loss income attributable to
noncontrolling interest was $0.7 million, $1.5 million and $1.6 million for 2019, 2018 and 2017, respectively, which represents
the 40% noncontrolling ownership of the net loss reported.
Liquidity and Capital Resources
Liquidity
Our primary liquidity needs are to fund our working capital requirements, capital expenditures and distributions and to
service our indebtedness. Our primary sources of liquidity are cash generated from operations, amounts available under our
working capital revolving credit facility and equity and debt offerings. Please read “—Credit Agreement” for more information
on our working capital revolving credit facility.
Working capital was $250.6 million and $292.2 million at December 31, 2019 and 2018, respectively, a decrease of
$41.6 million, largely due to an increase of $68.2 million in the current portion of our lease liability related to the adoption of
ASC 842 (see Note 3 of Notes to Consolidated Financial Statements). Working capital was negatively impacted by increases of
$64.4 million in accounts payable and $45.6 million in the current portion of our working capital revolving credit facility,
primarily due to higher prices, which was more than offset by the increases of $78.4 million in accounts receivable and
$64.0 million inventories, also primarily due to higher prices.
Cash Distributions
Common Units
During 2019, we paid the following cash distributions to our common unitholders and our general partner:
Cash Distribution Payment Date
February 14, 2019
May 15, 2019
August 14, 2019
November 14, 2019
Total Paid
17.3 million
17.7 million
17.9 million
18.1 million
$
$
$
$
Distribution Paid for the
Quarterly Period Ended
Fourth quarter 2018
First quarter 2019
Second quarter 2019
Third quarter 2019
In addition, on January 27, 2020, the board of directors of our general partner declared a quarterly cash distribution of
$0.5250 per unit ($2.10 per unit on an annualized basis) on all of our outstanding common units for the period from October 1,
2019 through December 31, 2019 to our common unitholders of record as of the close of business February 10, 2020. This
distribution resulted in our reaching our second target level distribution for the quarter ended December 31, 2019. On
February 14, 2020, we paid the total cash distribution of approximately $18.3 million.
Preferred Units
During 2019, we paid the following cash distributions to holders of the Series A Preferred Units:
Cash Distribution Payment Date
February 15, 2019
May 15, 2019
August 15, 2019
November 15, 2019
Total Paid
1.7 million
1.7 million
1.7 million
1.7 million
$
$
$
$
Distribution Paid for the
Quarterly Period Covering
November 15, 2018 - February 14, 2019
February 15, 2019 - May 14, 2019
May 15, 2019 - August 14, 2019
August 15, 2019 - November 14, 2019
In addition, on January 21, 2020, the board of directors of our general partner declared a quarterly cash distribution of
$0.609375 per unit ($2.4375 per unit on an annualized basis) on our Series A Preferred Units for the
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period from November 15, 2019 through February 14, 2020 to our preferred unitholders of record as of the opening of business on
February 3, 2020. On February 18, 2020, we paid the total cash distribution of approximately $1.7 million.
Contractual Obligations
We have contractual obligations that are required to be settled in cash. The amounts of our contractual obligations at
December 31, 2019 were as follows (in thousands):
Payments Due by Period
Contractual Obligations
Credit facility obligations (1)
Senior notes obligations (2)
Operating lease obligations (3)
Other long-term liabilities (4)
Financing obligations (5)
Total
2020
2021
$ 171,333 $ 291,742
49,000
77,575
26,750
15,016
$ 352,017 $ 460,083
49,000
87,606
29,300
14,778
2022
$ 95,917
49,000
52,673
21,941
15,261
$ 234,792
2023
$
338,500
41,512
13,079
15,510
$ 408,601
— $
2024 and
Thereafter
— $
Total
558,992
512,000
997,500
105,320
364,686
49,862
140,932
97,874
158,439
765,056 $ 2,220,549
$
(1)
(2)
(3)
(4)
(5)
Includes principal and interest on our working capital revolving credit facility and our revolving credit facility at December 31, 2019
and assumes a ratable payment through the expiration date. Our credit agreement has a contractual maturity of April 29, 2022 and no
principal payments are required prior to that date. However, we repay amounts outstanding and reborrow funds based on our working
capital requirements. Therefore, the current portion of the working capital revolving credit facility included in the accompanying
consolidated balance sheets is the amount we expect to pay down during the course of the year, and the long-term portion of the
working capital revolving credit facility is the amount we expect to be outstanding during the entire year. Please read “—Credit
Agreement” for more information on our working capital revolving credit facility.
Includes principal and interest on our senior notes. No principal payments are required prior to maturity. See “—Liquidity and Capital
Resources—Senior Notes” for additional information on our senior notes.
Includes operating lease obligations related to leases for office space and computer equipment, land, gasoline stations, railcars and
barges. See Note 3 of Notes to Consolidated Financial Statements for additional information.
Includes amounts related to our 15-year brand fee agreement entered into in 2010 with ExxonMobil and amounts related to our pipeline
connection agreements, natural gas transportation and reservation agreements and access right agreements (see Note 11 of Notes to
Consolidated Financial Statements for additional information on these agreements) and our pension and deferred compensation
obligations.
Includes lease rental payments in connection with (i) the acquisition of Capitol related to properties previously sold by Capitol within
two sale-leaseback transactions; and (ii) the sale of real property assets at 30 gasoline stations and convenience stores. These
transactions did not meet the criteria for sale accounting and the lease rental payments are classified as interest expense on the
respective financing obligation and the pay-down of the related financing obligation. See Note 8 of Notes to Consolidated Financial
Statement for additional information.
See Note 3 of Notes to Consolidated Financial Statements with respect to sublease information related to certain lease
agreements and Note 11 of Notes to Consolidated Financial Statements with respect to purchase commitments.
Capital Expenditures
Our operations require investments to maintain, expand, upgrade and enhance existing operations and to meet
environmental and operational regulations. We categorize our capital requirements as either maintenance capital expenditures or
expansion capital expenditures. Maintenance capital expenditures represent capital expenditures to repair or replace partially or
fully depreciated assets to maintain the operating capacity of, or revenues generated by, existing assets and extend their useful
lives. Maintenance capital expenditures also include expenditures required to maintain equipment reliability, tank and pipeline
integrity and safety and to address certain environmental regulations. We anticipate that maintenance capital expenditures will be
funded with cash generated by operations. We had approximately $49.9 million, $38.6 million and $34.7 million in maintenance
capital expenditures for the years ended December 31, 2019, 2018 and 2017, respectively, which are included in capital
expenditures in the accompanying consolidated statements of cash flows, of which approximately $45.0 million, $33.6 million
and $27.9 million for 2019, 2018 and 2017, respectively, are related to our investments in our gasoline station business. Repair
and maintenance
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expenses associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to
operating expenses as incurred.
Expansion capital expenditures include expenditures to acquire assets to grow our businesses or expand our existing
facilities, such as projects that increase our operating capacity or revenues by, for example, increasing dock capacity and tankage,
diversifying product availability, investing in raze and rebuilds and new‑to‑industry gasoline stations and convenience stores,
increasing storage flexibility at various terminals and by adding terminals to our storage network. We have the ability to fund our
expansion capital expenditures through cash from operations or our credit agreement or by issuing debt securities or additional
equity. We had approximately $33.0 million, $175.7 million, and $29.2 million in expansion capital expenditures, including
acquisitions, for the years ended December 31, 2019, 2018 and 2017, respectively.
In 2019, the $33.0 million in expansion capital expenditures included approximately $31.1 million in raze and rebuilds,
expansion and improvements at retail gasoline stations and new-to-industry sites and $1.9 million in other expansion capital
expenditures, primarily related to investments at our terminals and information technology projects.
In 2018, the $175.7 million in expansion capital expenditures included approximately $145.1 million in property and
equipment associated with the acquisitions of Cheshire and Champlain. In addition, we had $30.6 million in expansion capital
expenditures primarily related to investments in our gasoline stations, including, in part, raze and rebuilds and new-to-industry
sites.
In 2017, the $29.2 million in expansion capital expenditures included approximately $14.1 million in property and
equipment associated with the acquisition of Honey Farms. In addition, we had $15.1 million in expansion capital expenditures
which consists of $8.7 million in raze and rebuilds, expansion and improvements at retail gasoline stations and new-to-industry
sites, and $6.4 million in other expansion capital expenditures, primarily related to investments in information technology and
computer equipment.
We currently expect maintenance capital expenditures of approximately $45.0 million to $55.0 million and expansion
capital expenditures, excluding acquisitions, of approximately $30.0 million to $40.0 million in 2020, relating primarily to
investments in our gasoline station business. These current estimates depend, in part, on the timing of completion of projects,
availability of equipment, weather and unanticipated events or opportunities requiring additional maintenance or investments.
We believe that we will have sufficient cash flow from operations, borrowing capacity under our credit agreement and
the ability to issue additional equity and/or debt securities to meet our financial commitments, debt service obligations,
contingencies and anticipated capital expenditures. However, we are subject to business and operational risks that could adversely
affect our cash flow. A material decrease in our cash flows would likely have an adverse effect on our borrowing capacity as well
as our ability to issue additional equity and/or debt securities.
Cash Flow
The following table summarizes cash flow activity for the years ended December 31 (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
2019
2018
94,402
(67,214)
(23,267)
$
$
$
168,856
(225,720)
50,127
$
$
$
2017
348,442
(61,644)
(281,968)
$
$
$
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Operating Activities
Cash flow from operating activities generally reflects our net income, balance sheet changes arising from inventory
purchasing patterns, the timing of collections on our accounts receivable, the seasonality of parts of our businesses, fluctuations in
product prices, working capital requirements and general market conditions.
Net cash provided by operating activities was $94.4 million, $168.9 million and $348.4 million for 2019, 2018 and 2017,
respectively, for a year-over-year decrease in cash flow from operating activities of $74.5 million in 2019 and $179.5 million in
2018. For 2018, cash flow from operating activities was not impacted by the non-cash gain of $52.6 million as a result of the
extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit. This gain was included in net
income and offset by the corresponding decrease in the liability which had historically been included in trustee taxes (see Note 2
of Notes to Consolidated Financial Statements).
Except for net income, the primary drivers of the changes in operating activities include the following (in thousands):
(Increase) decrease in accounts receivable
(Increase) decrease in inventories
Increase (decrease) in accounts payable
Increase (decrease) in derivatives
2018
2019
Change
2017
3,886 $ 78,012
$(78,978) $ 81,898 $(160,876) $ 81,898 $
$(64,790) $(29,778) $ (35,012) $(29,778) $173,167 $(202,945)
2,417
$ 64,407 $ (4,433) $ 68,840 $ (4,433) $ (6,850) $
2,346 $ (34,110)
$ 30,030 $(31,764) $ 61,794 $(31,764)
Change
2018
In 2019, the increases in accounts receivable, inventories and accounts payable were primarily due to higher prices. The
decrease in operating cash flow was also impacted by the year-over-year change in derivatives of $61.8 million due to market
direction.
In 2018, the decrease in accounts receivable was due largely to the take-or-pay receivable with one particular crude oil
contract customer at December 31, 2017 that was not recognized at December 31, 2018. The increase in inventories was due to
higher inventory volume. The decrease in operating cash flow was also impacted by the year-over-year change in derivatives of
$34.1 million due to market direction and in trustee taxes of $24.2 million. The change in trustee taxes in 2017 includes the
$16.2 million payment related to an administratively closed New York State tax audit of our fuel and sales tax returns for the
periods between December 2008 through August 2013.
In 2017, the decrease in inventories is due to reduced inventory volume, in part due to a change in market structure and
to lower crude oil volume.
Investing Activities
Net cash used in investing activities was $67.2 million for 2019 and included $49.9 million in maintenance capital
expenditures, $33.0 million in expansion capital expenditures and $1.4 million in seller note issuances, offset by $17.1 million in
proceeds from the sale of property and equipment. The seller note issuances represent notes we received from buyers in
connection with the sale of certain of our gasoline stations.
Net cash used in investing activities was $225.7 million for 2018 and included $138.2 million and $33.4 million in cash
used to fund the acquisitions of Champlain and Cheshire, respectively, including inventory, $38.6 million in maintenance capital
expenditures, $30.6 million in expansion capital expenditures and $3.3 million in seller note issuances, offset by $18.4 million in
proceeds from the sale of property and equipment.
Net cash used in investing activities was $61.6 million for 2017 and included $38.5 million in cash to fund the
acquisition of Honey Farms, including inventory, $34.7 million in maintenance capital expenditures, $15.1 million in expansion
capital expenditures and $6.0 million in seller note issuances, offset by $32.7 million in proceeds from the sale of property and
equipment ($16.3 million from the sale of our natural gas marketing and electricity brokerage businesses, less $0.5 million in
related transaction costs, and $16.9 million primarily from the sales of GDSO sites).
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Please read “—Capital Expenditures” for a discussion of our expansion capital expenditures for the years ended
December 31, 2019, 2018 and 2017.
Financing Activities
Net cash used in financing activities was $23.3 million for 2019 and included $381.9 million in payments in connection
with the repurchase of the 2022 Notes and the issuance of the 2027 Notes, $76.6 million in cash distributions to our limited
partners (preferred and common unitholders) and our general partner, $27.3 million in net payments on our revolving credit
facility and $0.7 million in LTIP units withheld for tax obligations related to awards that vested in 2019. Net cash used in
financing activities was offset by $392.6 million in proceeds in connection with the issuance of the 2027 Notes and $70.6 million
in net borrowings from our working capital revolving credit facility in part due to higher prices.
Net cash provided by financing activities was $50.1 million for 2018 and included $66.4 million in net proceeds from
the issuance of the Series A Preferred Units, $26.6 million in net borrowings from our revolving credit facility and $24.0 million
in borrowings from our working capital revolving credit facility, offset by $66.0 million in cash distributions to our limited
partners (preferred and common unitholders) and our general partner and $0.8 million in LTIP units withheld for tax obligations
related to awards that vested in 2018.
Net cash used in financing activities was $282.0 million for 2017 and included $197.9 million in net payments on our
working capital revolving credit facility, due in part to reduced inventory volume which was partially due to a change in market
structure, $62.7 million in cash distributions to our common unitholders and our general partner, $20.7 million in net payments on
our revolving credit facility, $0.5 million in LTIP units withheld for tax obligations related to awards that vested in 2017 and
$0.5 million in distributions to our noncontrolling interest at Basin Transload, offset by $0.3 million in capital contributions from
our noncontrolling interest at Basin Transload.
See Note 8 of Notes to Consolidated Financial Statement for supplemental cash flow information related to our working
capital revolving credit facility and revolving credit facility for 2019, 2018 and 2017.
Credit Agreement
Certain subsidiaries of ours, as borrowers, and we and certain of our subsidiaries, as guarantors, have a $1.3 billion
senior secured credit facility. We repay amounts outstanding and reborrow funds based on our working capital requirements and,
therefore, classify as a current liability the portion of the working capital revolving credit facility we expect to pay down during
the course of the year. The long-term portion of the working capital revolving credit facility is the amount we expect to be
outstanding during the entire year. The credit agreement matures on April 29, 2022.
There are two facilities under the credit agreement:
·
·
a working capital revolving credit facility to be used for working capital purposes and letters of credit in the
principal amount equal to the lesser of our borrowing base and $850.0 million; and
a $450.0 million revolving credit facility to be used for general corporate purposes.
In addition, the credit agreement has an accordion feature whereby we may request on the same terms and conditions
then applicable to the credit agreement, provided no Event of Default (as defined in the credit agreement) then exists, an increase
to the working capital revolving credit facility, the revolving credit facility, or both, by up to another $300.0 million, in the
aggregate, for a total credit facility of up to $1.6 billion. Any such request for an increase must be in a minimum amount of
$25.0 million. We cannot provide assurance, however, that our lending group will agree to fund any request by us for additional
amounts in excess of the total available commitments of $1.3 billion.
In addition, the credit agreement includes a swing line pursuant to which Bank of America, N.A., as the swing line
lender, may make swing line loans in U.S. dollars in an aggregate amount equal to the lesser of (a) $75.0 million and
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(b) the Aggregate WC Commitments (as defined in the credit agreement). Swing line loans will bear interest at the Base Rate (as
defined in the credit agreement). The swing line is a sub-portion of the working capital revolving credit facility and is not an
addition to the total available commitments of $1.3 billion.
Availability under the working capital revolving credit facility is subject to a borrowing base which is redetermined from
time to time and based on specific advance rates on eligible current assets. Under the credit agreement, borrowings under the
working capital revolving credit facility cannot exceed the then current borrowing base. Availability under the borrowing base
may be affected by events beyond our control, such as changes in petroleum product prices, collection cycles, counterparty
performance, advance rates and limits and general economic conditions. These and other events could require us to seek waivers
or amendments of covenants or alternative sources of financing or to reduce expenditures. We can provide no assurance that such
waivers, amendments or alternative financing could be obtained or, if obtained, would be on terms acceptable to us.
Borrowings under the working capital revolving credit facility bear interest at (1) the Eurocurrency rate plus 2.00% to
2.50%, (2) the cost of funds rate plus 2.00% to 2.50%, or (3) the base rate plus 1.00% to 1.50%, each depending on the Utilization
Amount (as defined in the credit agreement). Borrowings under the revolving credit facility bear interest at (1) the Eurocurrency
rate plus 1.75% to 2.75%, (2) the cost of funds rate plus 1.75% to 2.75%, or (3) the base rate plus 0.75% to 1.75%, each
depending on the Combined Total Leverage Ratio (as defined in the credit agreement).
The average interest rates for the credit agreement were 4.3%, 4.0% and 3.7% for the years ended December 31, 2019,
2018 and 2017, respectively.
On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling
banks to submit LIBOR rates after 2021. Under our credit agreement, if a comparable or successor rate to LIBOR is approved by
Bank of America, N.A., in its capacity as administrative agent under our credit agreement, the approved rate will be applied in a
manner consistent with market practice. To the extent market practice is not administratively feasible for the administrative agent,
the approved rate will be applied in a manner otherwise reasonably determined by the administrative agent. We currently do not
expect the transition from LIBOR to have a material impact on us. However, if clear market standards and replacement
methodologies have not developed as of the time LIBOR becomes unavailable, we may have difficulty reaching agreement on
acceptable replacement rates under our credit agreement. In the event that we do not reach agreement on an acceptable
replacement rate for LIBOR, outstanding borrowings under the credit agreement denominated in U.S. dollars would revert to a
floating rate equal to the base rate (which is equal to the greatest of the administrative agent’s prime rate, the Federal Funds
effective rate plus 0.50%, or 1-month LIBOR plus 1.00%) plus the applicable margin applicable to the alternative base rate which
is currently equal to between 0.75% and 1.75%. If we are unable to negotiate replacement rates on favorable terms, it could have
a material adverse effect on our financial condition, results of operations and cash distributions to unitholders.
The credit agreement provides for a letter of credit fee equal to the then applicable working capital rate or then
applicable revolver rate (each such rate as defined in the credit agreement) per annum for each letter of credit issued. In addition,
we incur a commitment fee on the unused portion of each facility under the credit agreement, ranging from 0.35% to 0.50% per
annum.
As of December 31, 2019, we had total borrowings outstanding under the credit agreement of $516.6 million, including
$192.7 million outstanding on the revolving credit facility. In addition, we had outstanding letters of credit of $123.2 million.
Subject to borrowing base limitations, the total remaining availability for borrowings and letters of credit was $660.2 million and
$770.7 million at December 31, 2019 and 2018, respectively.
The credit agreement is secured by substantially all of our assets and the assets of our wholly owned subsidiaries and is
guaranteed by us and our subsidiaries, Bursaw Oil LLC, Global Partners Energy Canada ULC, Warex Terminals Corporation,
Drake Petroleum Company, Inc., Puritan Oil Company, Inc. and Maryland Oil Company, Inc.
The credit agreement also includes (i) a $25.0 million general secured indebtedness basket, (ii) a $25.0 million general
investment basket, (iii) a $75.0 million secured indebtedness basket to permit the borrowers to enter into a
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Contango Facility (as defined in the credit agreement), (iv) a Sale/Leaseback Transaction (as defined in the credit agreement)
basket of $100.0 million, and (v) a basket of $50.0 million in an aggregate amount for the purchase of our common units,
provided that no Event of Default exists or would occur immediately following such purchase(s).
In addition, the credit agreement provides the ability for the borrowers to repay certain junior indebtedness, subject to a
$100.0 million cap, so long as no Event of Default has occurred or will exist immediately after making such repayment.
The credit agreement imposes financial covenants that require us to maintain certain minimum working capital amounts,
a minimum combined interest coverage ratio, a maximum senior secured leverage ratio and a maximum total leverage ratio. We
were in compliance with the foregoing covenants at December 31, 2019. The credit agreement also contains a representation
whereby there can be no event or circumstance, either individually or in the aggregate, that has had or could reasonably be
expected to have a Material Adverse Effect (as defined in the credit agreement). In addition, the credit agreement limits
distributions by us to our unitholders to the amount of Available Cash (as defined in the partnership agreement).
Senior Notes
7.00% Senior Notes Due 2027
On July 31, 2019, the Issuers issued $400.0 million aggregate principal amount of 7.00% senior notes due 2027 to the
2027 Notes Initial Purchasers in a private placement exempt from the registration requirements under the Securities Act. We used
the net proceeds from the offering to fund the repurchase of the 2022 Notes in a tender offer and to repay a portion of the
borrowings outstanding under our credit agreement. The redemption of the 2022 Notes occurred on August 30, 2019.
As a result of the repurchase of the 2022 Notes, we recorded a $13.1 million loss from early extinguishment of debt for
the year ended December 31, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-off of
remaining unamortized original issue discount and deferred financing fees.
2027 Notes Indenture
In connection with the private placement of the 2027 Notes on July 31, 2019, the Issuers and the subsidiary guarantors
and Deutsche Bank Trust Company Americas, as trustee, entered into an indenture (the “2027 Notes Indenture”).
The 2027 Notes will mature on August 1, 2027 with interest accruing at a rate of 7.00% per annum and payable semi-
annually in arrears on February 1 and August 1 of each year, commencing February 1, 2020. The 2027 Notes are guaranteed on a
joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent set forth in the 2027
Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal amount of the 2027
Notes may declare the 2027 Notes immediately due and payable, except that an event of default resulting from entry into a
bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of ours that is a significant
subsidiary or any group of our restricted subsidiaries that, taken together, would constitute a significant subsidiary of ours, will
automatically cause the 2027 Notes to become due and payable.
Prior to August 1, 2022, the Issuers have the option to redeem up to 35% of the 2027 Notes in an amount not greater
than the net cash proceeds of certain equity offerings at a redemption price (expressed as a percentage of principal amount) of
107% plus accrued and unpaid interest, if any. The Issuers have the option to redeem the 2027 Notes, in whole or in part, at any
time on or after August 1, 2022, at the redemption prices of 103.500% for the twelve-month period beginning on August 1, 2022,
102.333% for the twelve-month period beginning August 1, 2023, 101.167% for the twelve-month period beginning August 1,
2024, and 100% beginning on August 1, 2025 and at any time thereafter, together with any accrued and unpaid interest to the date
of redemption. In addition, before August 1, 2022, the Issuers may redeem all or any part of the 2027 Notes at a redemption price
equal to the sum of the principal amount
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thereof, plus a make whole premium, plus accrued and unpaid interest, if any, to the redemption date. The holders of the 2027
Notes may require the Issuers to repurchase the 2027 Notes following certain asset sales or a Change of Control Triggering Event
(as defined in the 2027 Notes Indenture) at the prices and on the terms specified in the 2027 Notes Indenture.
The 2027 Notes Indenture contains covenants that will limit our ability to, among other things, incur additional
indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and other
restricted payments, restrict distributions by our subsidiaries, create liens, sell assets or merge with other entities. Events of
default under the 2027 Notes Indenture include (i) a default in payment of principal of, or interest or premium, if any, on, the
2027 Notes, (ii) breach of our covenants under the 2027 Notes Indenture, (iii) certain events of bankruptcy and insolvency,
(iv) any payment default or acceleration of indebtedness of ours or certain subsidiaries if the total amount of such indebtedness
unpaid or accelerated exceeds $50.0 million and (v) failure to pay within 60 days uninsured final judgments exceeding
$50.0 million.
2027 Notes Registration Rights Agreement
On July 31, 2019, the Issuers and the subsidiary guarantors entered into a registration rights agreement (the “2027 Notes
Registration Rights Agreement”) with the 2027 Notes Initial Purchasers in connection with the Issuers’ private placement of the
2027 Notes. Under the 2027 Notes Registration Rights Agreement, the Issuers and the subsidiary guarantors agreed to file and use
commercially reasonable efforts to cause to become effective a registration statement relating to an offer to exchange the 2027
Notes for an issue of notes with terms identical to the 2027 Notes (except that the exchange notes will not be subject to
restrictions on transfer or to any increase in annual interest rate for failure to comply with the 2027 Notes Registration Rights
Agreement) that are registered under the Securities Act so as to permit the exchange offer to be consummated by September 23,
2020. The exchange offer was completed on February 18, 2020, and 100% of the 2027 Notes were exchanged for SEC-registered
notes.
7.00% Senior Notes Due 2023
On June 1, 2015, the Issuers entered into a Purchase Agreement with the Initial Purchasers (as defined therein) (the
“2023 Notes Initial Purchasers”) pursuant to which the Issuers agreed to sell $300.0 million aggregate principal amount of the
Issuers’ 7.00% senior notes due 2023 (the “2023 Notes”) to the 2023 Notes Initial Purchasers in a private placement exempt from
the registration requirements under the Securities Act. The 2023 Notes were resold by the 2023 Notes Initial Purchasers to
qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to
Regulation S under the Securities Act.
2023 Notes Indenture
In connection with the private placement of the 2023 Notes on June 4, 2015 the Issuers and the subsidiary guarantors
and Deutsche Bank Trust Company Americas, as trustee, entered into an indenture (the “2023 Notes Indenture”).
The 2023 Notes will mature on June 15, 2023 with interest accruing at a rate of 7.00% per annum and payable semi-
annually in arrears on June 15 and December 15 of each year, commencing December 15, 2015. The 2023 Notes are guaranteed
on a joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent set forth in the
2023 Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal amount of the
2023 Notes may declare the 2023 Notes immediately due and payable, except that an event of default resulting from entry into a
bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of ours that is a significant
subsidiary or any group of our restricted subsidiaries that, taken together, would constitute a significant subsidiary of ours, will
automatically cause the 2023 Notes to become due and payable.
The Issuers have the option to redeem the 2023 Notes, in whole or in part, at the redemption prices of 103.500% for the
twelve-month period beginning June 15, 2019, 101.750% for the twelve-month period beginning June 15, 2020, and 100.0%
beginning June 15, 2021 and at any time thereafter, together with any accrued and unpaid interest to the date
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of redemption. The holders of the 2023 Notes may require the Issuers to repurchase the 2023 Notes following certain asset sales
or a Change of Control (as defined in the 2023 Notes Indenture) at the prices and on the terms specified in the 2023 Notes
Indenture.
The 2023 Notes Indenture contains covenants that will limit our ability to, among other things, incur additional
indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and other
restricted payments, restrict distributions by our subsidiaries, create liens, enter into sale-leaseback transactions, sell assets or
merge with other entities. Events of default under the 2023 Notes Indenture include (i) a default in payment of principal of, or
interest or premium, if any, on, the 2023 Notes, (ii) breach of our covenants under the 2023 Notes Indenture, (iii) certain events of
bankruptcy and insolvency, (iv) any payment default or acceleration of indebtedness of ours or certain subsidiaries if the total
amount of such indebtedness unpaid or accelerated exceeds $50.0 million and (v) failure to pay within 60 days uninsured final
judgments exceeding $50.0 million.
Financing Obligations
Capitol Acquisition
On June 1, 2015, we acquired retail gasoline stations and dealer supply contracts from Capitol Petroleum Group
(“Capitol”). In connection with the acquisition, we assumed a financing obligation of $89.6 million associated with two sale-
leaseback transactions by Capitol for 53 leased sites that did not meet the criteria for sale accounting. During the terms of these
leases, which expire in May 2028 and September 2029, in lieu of recognizing lease expense for the lease rental payments, we
incur interest expense associated with the financing obligation. Interest expense of approximately $9.3 million, $9.4 million and
$9.6 million was recorded for the years ended December 31, 2019, 2018 and 2017, respectively, and is included in interest
expense in the accompanying consolidated statements of operations. The financing obligation will amortize through expiration of
the leases based upon the lease rental payments which were $9.9 million, $9.7 million and $9.7 million for the years ended
December 31, 2019, 2018 and 2017, respectively. The financing obligation balance outstanding at December 31, 2019 was
$87.0 million associated with the Capitol acquisition.
Sale-Leaseback Transaction
On June 29, 2016, we sold to a premier institutional real estate investor (the “Buyer”) real property assets, including the
buildings, improvements and appurtenances thereto, at 30 gasoline stations and convenience stores located in Connecticut, Maine,
Massachusetts, New Hampshire and Rhode Island (the “Sale-Leaseback Sites”) for a purchase price of approximately
$63.5 million. In connection with the sale, we entered into a Master Unitary Lease Agreement with the Buyer to lease back the
real property assets sold with respect to the Sale-Leaseback Sites (such Master Lease Agreement, together with the Sale-
Leaseback Sites, the “Sale-Leaseback Transaction”). The Master Unitary Lease Agreement provides for an initial term of fifteen
years that expires in 2031. We have one successive option to renew the lease for a ten-year period followed by two successive
options to renew the lease for five-year periods on the same terms, covenants, conditions and rental as the primary non-revocable
lease term. We do not have any residual interest nor the option to repurchase any of the sites at the end of the lease term. The
proceeds from the Sale-Leaseback Transaction were used to reduce indebtedness outstanding under our revolving credit facility.
The sale did not meet the criteria for sale accounting as of December 31, 2019 due to prohibited continuing involvement.
Specifically, the sale is considered a partial-sale transaction, which is a form of continuing involvement as we did not transfer to
the Buyer the storage tank systems which are considered integral equipment of the Sale-Leaseback Sites. Additionally, a portion
of the sold sites have material sub-lease arrangements, which is also a form of continuing involvement. As the sale of the Sale-
Leaseback Sites did not meet the criteria for sale accounting, we did not recognize a gain or loss on the sale of the Sale-Leaseback
Sites for the year ended December 31, 2019.
As a result of not meeting the criteria for sale accounting for these sites, the Sale-Leaseback Transaction is accounted for
as a financing arrangement. As such, the property and equipment sold and leased back by us has not been derecognized and
continues to be depreciated. We recognized a corresponding financing obligation of $62.5 million equal to the $63.5 million cash
proceeds received for the sale of these sites, net of $1.0 million financing fees. During the
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term of the lease, which expires in June 2031, in lieu of recognizing lease expense for the lease rental payments, we incur interest
expense associated with the financing obligation. Lease rental payments are recognized as both interest expense and a reduction
of the principal balance associated with the financing obligation. Interest expense was $4.4 million for each of the years ended
December 31, 2019, 2018 and 2017, and lease rental payments were $4.6 million, $4.5 million and $4.5 million for the years
ended December 31, 2019, 2018 and 2017, respectively. The financing obligation balance outstanding at December 31, 2019 was
$62.3 million associated with the Sale-Leaseback Transaction.
Off‑‑Balance Sheet Arrangements
We have no off‑balance sheet arrangements.
Impact of Inflation
Inflation has been relatively low in recent years and did not have a material impact on our results of operations for the
years ended December 31, 2019, 2018 and 2017.
Environmental Matters
Our businesses of purchasing, storing, supplying and distributing refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane, and other business activities, involves a number of activities that are subject to extensive
and stringent environmental laws. For a complete discussion of the environmental laws and regulations affecting our businesses,
please read Items 1 and 2, “Business and Properties—Environmental.” For additional information regarding our environmental
liabilities, see Note 14 of Notes to Consolidated Financial Statements included elsewhere in this report.
Critical Accounting Policies and Estimates
A summary of the significant accounting policies that we have adopted and followed in the preparation of our
consolidated financial statements is detailed in Note 2 of Notes to Consolidated Financial Statements. Certain of these accounting
policies require the use of estimates. These estimates are based on our knowledge and understanding of current conditions and
actions that we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence
of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of
operations and are recorded in the period in which they become known. We have identified the following estimates that, in our
opinion, are subjective in nature, require the exercise of judgment and involve complex analysis:
Inventory
We hedge substantially all of our petroleum and ethanol inventory using a variety of instruments, primarily
exchange‑traded futures contracts. These futures contracts are entered into when inventory is purchased and are either designated
as fair value hedges against the inventory on a specific barrel basis for inventories qualifying for fair value hedge accounting or
not designated and maintained as economic hedges against certain inventory of ours on a specific barrel basis. Changes in fair
value of these futures contracts, as well as the offsetting change in fair value on the hedged inventory, are recognized in earnings
as an increase or decrease in cost of sales. All hedged inventory designated in a fair value hedge relationship is valued using the
lower of cost, as determined by specific identification, or net realizable value, as determined at the product level. All petroleum
and ethanol inventory not designated in a fair value hedging relationship is carried at the lower of historical cost, on a first‑in,
first‑out basis, or net realizable value. RIN inventory is carried at the lower of historical cost, on a first-in, first-out basis, or net
realizable value. Convenience store inventory is carried at the lower of historical cost, based on a weighted average cost method,
or net realizable value.
In addition to our own inventory, we have exchange agreements for petroleum products and ethanol with unrelated third-
party suppliers, whereby we may draw inventory from these other suppliers and suppliers may draw inventory from us. Positive
exchange balances are accounted for as accounts receivable. Negative exchange balances are accounted for as accounts payable.
Exchange transactions are valued using current carrying costs.
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Leases
We have gasoline station and convenience store leases, primarily of land and buildings. We have terminal and dedicated
storage facility lease arrangements with various petroleum terminals and third parties, of which certain arrangements have
minimum usage requirements. We lease barges through various time charter lease arrangements and railcars through various lease
arrangements. We also have leases for office space, computer and convenience store equipment and automobiles. Our lease
arrangements have various expiration dates with options to extend.
We are also the lessor party to various lease arrangements with various expiration dates, including the leasing of
gasoline stations and certain equipment to third-party station operators and cobranding lease agreements for certain space within
our gasoline stations and convenience stores.
In addition, we are party to three master unitary lease agreements in connection with (i) the June 2015 acquisition of
retail gasoline stations from Capitol related to properties previously sold by Capitol within two sale-leaseback transactions; and
(ii) the June 2016 sale of real property assets at 30 gasoline stations and convenience stores that did not meet the criteria for sale
accounting. These transactions continue to be accounted for as financing obligations upon transition to ASC 842, “Leases,” which
we adopted on January 1, 2019.
Accounting and reporting guidance for leases requires that leases be evaluated and classified as either operating or
finance leases by the lessee and as either operating, sales-type or direct financing leases by the lessor. Our operating leases are
included in right-of-use (“ROU”) assets, lease liability-current portion and long-term lease liability-less current portion in the
accompanying consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent the obligation
to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based
on the present value of lease payments over the lease term. Our variable lease payments consist of payments that depend on an
index or rate (such as the Consumer Price Index) as well as those payments that depend on our performance or use of the
underlying asset related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are
recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit
rate in determining the net present value of lease payments, we use our incremental borrowing rate based on the information
available at the lease commencement date. ROU assets also include any lease payments made and exclude lease incentives. Many
of our lessee agreements include options to extend the lease, which are not included in the minimum lease terms unless they are
reasonably certain to be exercised. Rental expense for lease payments related to operating leases is recognized on a straight-line
basis over the lease term.
Rental income for lease payments received related to operating leases is recognized on a straight-line basis over the lease
term.
We have elected the package of practical expedients permitted under the transition guidance within the new standard
which, among other things, allows us to carry forward the historical accounting relating to lease identification and classification
for existing leases upon adoption. Leases with an initial term of 12 months or less are not recorded on the balance sheet as we
recognize lease expense for these leases on a straight-line basis over the lease term.
Our leases have contracted terms as follows:
Gasoline station and convenience store leases
Terminal lease arrangements
Dedicated storage facility leases
Barge and railcar equipment leases
Office space leases
Computer equipment, convenience store equipment and automobile leases
1-20 years
1-5 years
1-5 years
1-10 years
1-12 years
1-5 years
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The above table excludes our West Coast facility land lease arrangement which contract term is subject to expiration
through July 2066. Some of the above leases include options to extend the leases for up to an additional 30 years. We do not
include renewal options in our lease terms for calculating the lease liability unless we are reasonably certain the renewal options
are to be exercised. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there
is a transfer of title or purchase option reasonably certain of exercise.
Revenue Recognition
Our sales relate primarily to the sale of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and
propane and are recognized along with the related receivable upon delivery, net of applicable provisions for discounts and
allowances. We may also provide for shipping costs at the time of sale, which are included in cost of sales.
Contracts with customers typically contain pricing provisions that are tied to a market index, with certain adjustments
based on quality and freight due to location differences and prevailing supply and demand conditions, as well as other factors. As
a result, the price of the products fluctuates to remain competitive with other available product supplies. The revenue associated
with such arrangements is recognized upon delivery.
In addition, we generate revenue from our logistics activities when we store, transload and ship products owned by
others. Revenue from logistics services is recognized as services are provided.
Logistics agreements may require counterparties to throughput a minimum volume over an agreed-upon period and may
include make-up rights if the minimum volume is not met. We recognize revenue associated with make-up rights at the earlier of
when the make-up volume is shipped, the make-up right expires or when it is determined that the likelihood that the shipper will
utilize the make-up right is remote.
We also recognize convenience store sales of gasoline, grocery and other merchandise and sundries at the time of the
sale to the customer. Gasoline station rental income is recognized on a straight‑line basis over the term of the lease.
Product revenue is not recognized on exchange agreements, which are entered into primarily to acquire various refined
petroleum products, gasoline blendstocks, renewable fuels and crude oil of a desired quality or to reduce transportation costs by
taking delivery of products closer to our end markets. We recognize net exchange differentials due from exchange partners in
sales upon delivery of product to an exchange partner. We recognize net exchange differentials due to exchange partners in cost
of sales upon receipt of product from an exchange partner.
The amounts recorded for bad debts are generally based upon a specific analysis of aged accounts while also factoring in
any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular
customers. Bad debt provisions are included in selling, general and administrative expenses.
Trustee Taxes
We collect trustee taxes, which consist of various pass through taxes collected on behalf of taxing authorities, and remit
such taxes directly to those taxing authorities. Examples of trustee taxes include, among other things, motor fuel excise tax and
sales and use tax. As such, it is our policy to exclude trustee taxes from revenues and cost of sales and account for them as current
liabilities. We may be subject to audits of our state and federal tax returns prepared for trustee taxes.
Derivative Financial Instruments
We principally use derivative instruments, which include regulated exchange‑traded futures and options contracts
(collectively, “exchange‑traded derivatives”) and physical and financial forwards and over‑the counter (“OTC”) swaps
(collectively, “OTC derivatives”), to reduce our exposure to unfavorable changes in commodity market prices and interest rates.
We use these exchange‑traded and OTC derivatives to hedge commodity price risk associated with our inventory and undelivered
forward commodity purchases and sales (“physical forward contracts”). We account
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for derivative transactions in accordance with ASC Topic 815, “Derivatives and Hedging,” and recognize derivatives instruments
as either assets or liabilities in the consolidated balance sheet and measure those instruments at fair value. The changes in fair
value of the derivative transactions are presented currently in earnings, unless specific hedge accounting criteria are met.
The fair value of exchange‑traded derivative transactions reflects amounts that would be received from or paid to our
brokers upon liquidation of these contracts. The fair value of these exchange‑traded derivative transactions is presented on a net
basis, offset by the cash balances on deposit with our brokers, presented as brokerage margin deposits in the consolidated balance
sheets. The fair value of OTC derivative transactions reflects amounts that would be received from or paid to a third party upon
liquidation of these contracts under current market conditions. The fair value of these OTC derivative transactions is presented on
a gross basis as derivative assets or derivative liabilities in the consolidated balance sheets, unless a legal right of offset exists.
The presentation of the change in fair value of our exchange‑traded derivatives and OTC derivative transactions depends on the
intended use of the derivative and the resulting designation.
Derivatives Accounted for as Hedges—We utilize fair value hedges to hedge commodity price risk and interest rate
risk.
Derivatives designated as fair value hedges are used to hedge price risk in commodity inventories and principally
include exchange‑traded futures contracts that are entered into in the ordinary course of business. For a derivative instrument
designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting
change in fair value on the hedged item of the risk being hedged. Gains and losses related to fair value hedges are recognized in
the consolidated statements of operations through cost of sales. These futures contracts are settled on a daily basis by us through
brokerage margin accounts.
Our fair value hedges include exchange-traded futures contracts and OTC derivative contracts that are hedges against
inventory with specific futures contracts matched to specific barrels. The change in fair value of these futures contracts and the
change in fair value of the underlying inventory generally provide an offset to each other in the consolidated statement of
operations.
Derivatives Not Accounted for as Hedges—We utilize petroleum and ethanol commodity contracts and foreign
currency derivatives to hedge price and currency risk in certain commodity inventories and physical forward contracts.
Petroleum and Ethanol Commodity Contracts
We use exchange‑traded derivative contracts to hedge price risk in certain commodity inventories which do not qualify
for fair value hedge accounting or are not designated by us as fair value hedges. Additionally, we use exchange‑traded derivative
contracts, and occasionally financial forward and OTC swap agreements, to hedge commodity price exposure associated with our
physical forward contracts which are not designated by us as cash flow hedges. These physical forward contracts, to the extent
they meet the definition of a derivative, are considered OTC physical forwards and are reflected as derivative assets or derivative
liabilities in the consolidated balance sheet. The related exchange‑traded derivative contracts (and financial forward and OTC
swaps, if applicable) are also reflected as brokerage margin deposits (and derivative assets or derivative liabilities, if applicable)
in the consolidated balance sheet, thereby creating an economic hedge. Changes in fair value of these derivative instruments are
recognized in the consolidated statement of operations through cost of sales. These exchange traded derivatives are settled on a
daily basis by us through brokerage margin accounts.
While we seek to maintain a position that is substantially balanced within our commodity product purchase and sale
activities, we may experience net unbalanced positions for short periods of time as a result of variances in daily purchases and
sales and transportation and delivery schedules as well as other logistical issues inherent in our businesses, such as weather
conditions. In connection with managing these positions, we are aided by maintaining a constant presence in the marketplace. We
also engage in a controlled trading program for up to an aggregate of 250,000 barrels of commodity products at any one point in
time. Changes in fair value of these derivative instruments are recognized in the consolidated statement of operations through cost
of sales.
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Foreign Currency Contracts
We may use forward foreign currency contracts to hedge certain foreign denominated (Canadian) commodity product
purchases. These forward foreign currency contracts are not designated by us as hedges and are reflected as prepaid expenses and
other current assets or accrued expenses and other current liabilities in our consolidated balance sheets. Changes in fair values of
these forward foreign currency contracts are reflected in cost of sales.
Margin Deposits
All of our exchange‑traded derivative contracts (designated and not designated) are transacted through clearing brokers.
We deposit initial margin with the clearing brokers, along with variation margin, which is paid or received on a daily basis, based
upon the changes in fair value of open futures contracts and settlement of closed futures contracts. Cash balances on deposit with
clearing brokers and open equity are presented on a net basis within brokerage margin deposits in the consolidated balance sheets.
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not
individually identified and separately recognized. We have concluded that our operating segments are also our reporting units.
Goodwill is tested for impairment annually as of October 1 or when events or changes in circumstances indicate that the carrying
amount of goodwill may not be recoverable. Derecognized goodwill associated with our disposition activities of GDSO sites is
included in the carrying value of assets sold in determining the gain or loss on disposal, to the extent the disposition of assets
qualifies as a disposition of a business under ASC 805. The GDSO reporting unit’s goodwill that was derecognized related to the
disposition of sites that met the definition of a business was $2.9 million, $3.9 million and $4.0 million for the years ended
December 31, 2019, 2018 and 2017, respectively (see Note 7 of Notes to Consolidated Financial Statements).
All of our goodwill is allocated to the GDSO segment. During 2019, 2018 and 2017, we completed a quantitative
assessment for the GDSO reporting unit. Factors included in the assessment included both macro‑economic conditions and
industry specific conditions, and the fair value of the GDSO reporting unit was estimated using a weighted average of a
discounted cash flow approach and a market comparables approach. Based on our assessment, no impairment was identified.
Evaluation of Long-Lived Asset Impairment
Accounting and reporting guidance for long‑lived assets requires that a long‑lived asset (group) be reviewed for
impairment when events or changes in circumstances indicate that the carrying amount might not be recoverable. Accordingly,
we evaluate long-lived assets for impairment whenever indicators of impairment are identified. If indicators of impairment are
present, we assess impairment by comparing the undiscounted projected future cash flows from the long‑lived assets to their
carrying value. If the undiscounted cash flows are less than the carrying value, the long‑lived assets will be reduced to their fair
value.
Environmental and Other Liabilities
We record accrued liabilities for all direct costs associated with the estimated resolution of contingencies at the earliest
date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated.
Costs accrued are estimated based upon an analysis of potential results, assuming a combination of litigation and settlement
strategies and outcomes.
Estimated losses from environmental remediation obligations generally are recognized no later than completion of a
remedial feasibility study. Loss accruals are adjusted as further information becomes available or circumstances change. Costs of
future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of
environmental remediation costs from other parties are recognized when related contingencies are resolved, generally upon cash
receipt.
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We are subject to other contingencies, including legal proceedings and claims arising out of our businesses that cover a
wide range of matters, including, environmental matters and contract and employment claims. Environmental and other legal
proceedings may also include matters with respect to businesses previously owned. Further, due to the lack of adequate
information and the potential impact of present regulations and any future regulations, there are certain circumstances in which no
range of potential exposure may be reasonably estimated.
Recent Accounting Pronouncements
A description and related impact expected from the adoption of certain new accounting pronouncements is provided in
Note 2 of Notes to Consolidated Financial Statements included elsewhere in this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to
which we are exposed are interest rate risk and commodity risk. We currently utilize various derivative instruments to manage
exposure to commodity risk.
Interest Rate Risk
We utilize variable rate debt and are exposed to market risk due to the floating interest rates on our credit agreement.
Therefore, from time to time, we utilize interest rate collars, swaps and caps to hedge interest obligations on specific and
anticipated debt issuances.
As of December 31, 2019, we had total borrowings outstanding under our credit agreement of $516.6 million. Please
read Part II, Item 7, “Management’s Discussion and Analysis—Liquidity and Capital Resources—Credit Agreement,” for
information on interest rates related to our borrowings. The impact of a 1% increase in the interest rate on this amount of debt
would have resulted in an increase in interest expense, and a corresponding decrease in our results of operations, of approximately
$5.2 million annually, assuming, however, that our indebtedness remained constant throughout the year.
Commodity Risk
We hedge our exposure to price fluctuations with respect to refined petroleum products, renewable fuels, crude oil and
gasoline blendstocks in storage and expected purchases and sales of these commodities. The derivative instruments utilized
consist primarily of exchange‑traded futures contracts traded on the NYMEX, CME and ICE and over‑the‑counter transactions,
including swap agreements entered into with established financial institutions and other credit‑approved energy companies. Our
policy is generally to purchase only products for which we have a market and to structure our sales contracts so that price
fluctuations do not materially affect our profit. While our policies are designed to minimize market risk, as well as inherent basis
risk, exposure to fluctuations in market conditions remains. Except for the controlled trading program discussed below, we do not
acquire and hold futures contracts or other derivative products for the purpose of speculating on price changes that might expose
us to indeterminable losses.
While we seek to maintain a position that is substantially balanced within our commodity product purchase and sales
activities, we may experience net unbalanced positions for short periods of time as a result of variances in daily purchases and
sales and transportation and delivery schedules as well as other logistical issues inherent in our businesses, such as weather
conditions. In connection with managing these positions, we are aided by maintaining a constant presence in the marketplace. We
also engage in a controlled trading program for up to an aggregate of 250,000 barrels of commodity products at any one point in
time. Changes in the fair value of these derivative instruments are recognized in the consolidated statements of operations through
cost of sales. In addition, because a portion of our crude oil business may be conducted in Canadian dollars, we may use foreign
currency derivatives to minimize the risks of unfavorable exchange rates. These instruments may include foreign currency
exchange contracts and forwards. In conjunction with entering into the commodity derivative, we may enter into a foreign
currency derivative to hedge the resulting foreign currency risk. These foreign currency derivatives are generally short‑term in
nature and not designated for hedge accounting.
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We utilize exchange‑traded futures contracts and other derivative instruments to minimize or hedge the impact of
commodity price changes on our inventories and forward fixed price commitments. Any hedge ineffectiveness is reflected in our
results of operations. We utilize regulated exchanges, including the NYMEX, CME and ICE, which are exchanges for the
respective commodities that each trades, thereby reducing potential delivery and supply risks. Generally, our practice is to close
all exchange positions rather than to make or receive physical deliveries.
At December 31, 2019, the fair value of all of our commodity risk derivative instruments and the change in fair value
that would be expected from a 10% price increase or decrease are shown in the table below (in thousands):
Exchange traded derivative contracts
Forward derivative contracts
Total
$
$
Fair Value at
December 31,
2019
Gain (Loss)
Effect of 10% Effect of 10%
Price Increase Price Decrease
29,581
6,985
36,566
(29,581) $
(6,985)
(36,566) $
1,453 $
(8,134)
(6,681) $
The fair values of the futures contracts are based on quoted market prices obtained from the NYMEX, CME and ICE.
The fair value of the swaps and option contracts are estimated based on quoted prices from various sources such as independent
reporting services, industry publications and brokers. These quotes are compared to the contract price of the swap, which
approximates the gain or loss that would have been realized if the contracts had been closed out at December 31, 2019. For
positions where independent quotations are not available, an estimate is provided, or the prevailing market price at which the
positions could be liquidated is used. All hedge positions offset physical exposures to the physical market; none of these
offsetting physical exposures are included in the above table. Price‑risk sensitivities were calculated by assuming an
across‑the‑board 10% increase or decrease in price regardless of term or historical relationships between the contractual price of
the instruments and the underlying commodity price. In the event of an actual 10% change in prompt month prices, the fair value
of our derivative portfolio would typically change less than that shown in the table due to lower volatility in out‑month prices. We
have a daily margin requirement to maintain a cash deposit with our brokers based on the prior day’s market results on open
futures contracts. The balance of this deposit will fluctuate based on our open market positions and the commodity exchange’s
requirements. The brokerage margin balance was $34.5 million at December 31, 2019.
We are exposed to credit loss in the event of nonperformance by counterparties to our exchange‑traded derivative
contracts, physical forward contracts and swap agreements. We anticipate some nonperformance by some of these counterparties
which, in the aggregate, we do not believe at this time will have a material adverse effect on our financial condition, results of
operations or cash available for distribution to our unitholders. Exchange‑traded derivative contracts, the primary derivative
instrument utilized by us, are traded on regulated exchanges, greatly reducing potential credit risks. We utilize major financial
institutions as our clearing brokers for all NYMEX, CME and ICE derivative transactions and the right of offset exists with these
financial institutions. Accordingly, the fair value of our exchange‑traded derivative instruments is presented on a net basis in the
consolidated balance sheet. Exposure on physical forward contracts and swap agreements is limited to the amount of the recorded
fair value as of the balance sheet dates.
Item 8. Financial Statements and Supplementary Data.
The information required here is included in the report as set forth in the “Index to Financial Statements” on page F‑1.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
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Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed
by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms and that information is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. Under the supervision and with the participation of our principal executive
officer and principal financial officer, management evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a‑15(e) or 15d‑15(e) of the Exchange Act). Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and procedures were operating and effective as of December 31,
2019.
Internal Control Over Financial Reporting
Management’s Annual Report
We are responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a‑15(f) or 15d‑15(f) of the Exchange Act). Our internal control over financial reporting is the process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with GAAP. There are inherent limitations in the effectiveness of internal control over financial
reporting, including the possibility that misstatements may not be prevented or detected. Accordingly, even effective internal
controls over financial reporting can provide only reasonable assurance with respect to financial statement preparation.
Under the supervision and with the participation of our principal executive officer and principal financial officer,
management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework
in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework). Based on that evaluation, management concluded that our internal control over financial reporting was
effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by Ernst &
Young LLP, our independent registered public accounting firm, as stated in their report. See “Report of Independent Registered
Public Accounting Firm” on Page F-3 of our consolidated financial statements.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended
December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information.
None.
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Item 10. Directors, Executive Officers and Corporate Governance.
PART III
Global GP LLC, our general partner, manages our operations and activities on our behalf. Our general partner is not
elected by our unitholders. Unitholders are not entitled to elect the directors of our general partner or directly or indirectly
participate in our management or operation. Affiliates of the Slifka family own 100% of the ownership interests in our general
partner. Our general partner is controlled by Richard Slifka and the Alfred A. Slifka 1990 Trust Under Article II-A (the “AS
Article II-A Trust”) directly and through their beneficial ownership of entities that own ownership interests in our general partner.
Eric Slifka and Andrew Slifka beneficially own interests in our general partner. Our general partner is liable, as general partner,
for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made specifically
nonrecourse to it. Whenever possible, our general partner intends to incur indebtedness or other obligations that are nonrecourse.
Alfred A. Slifka, former chairman of the board of our general partner, passed away on March 9, 2014. Mr. Slifka’s estate
closed effective February 28, 2017 and his interest in our general partner and his beneficially owned interests in Global
Partners LP and its affiliates were transferred to the AS Article II-A Trust on that date. Eric Slifka, our President and Chief
Executive Officer, and his two siblings are the trustees of the AS Article II-A Trust.
Four members of the board of directors of our general partner serve on a conflicts committee to review specific matters
that the board believes may involve conflicts of interest. The conflicts committee determines if the resolution of the conflict of
interest is fair and reasonable to us. Members of the conflicts committee may not be officers or employees of our general partner
or directors, officers or employees of its affiliates and must meet the independence and experience standards established by the
NYSE and the Securities Exchange Act of 1934. Any matters approved by the conflicts committee will be conclusively deemed to
be fair and reasonable to us, approved by all of our partners and not a breach by our general partner of any duties it may owe us or
our unitholders. In addition, we have a separately‑designated standing audit committee established in accordance with the
Securities Exchange Act of 1934 and a compensation committee. The four independent members of the board of directors of our
general partner, Messrs. McCool, McKown, Watchmaker and Hailer, serve as the sole members of the conflicts, audit and
compensation committees.
Even though most companies listed on the NYSE are required to have a majority of independent directors serving on the
board of directors of the listed company and establish and maintain an audit committee, a compensation committee and a
nominating/corporate governance committee, each consisting solely of independent directors, the NYSE does not require a listed
limited partnership like us to have a majority of independent directors on the board of directors of our general partner or to
establish a compensation committee or a nominating/corporate governance committee.
No member of the audit committee is an officer or employee of our general partner or director, officer or employee of
any affiliate of our general partner. Furthermore, each member of the audit committee is independent as defined in the listing
standards of the NYSE. The board of directors of our general partner has determined that a member of the audit committee,
namely Kenneth Watchmaker, is an “audit committee financial expert” as defined by the SEC.
Among other things, the audit committee is responsible for reviewing our external financial reporting, including reports
filed with the SEC, engaging and reviewing our independent auditors and reviewing procedures for internal auditing and the
adequacy of our internal accounting controls.
We are managed and operated by the directors and executive officers of our general partner. Our operating personnel are
employees of our general partner or certain of our operating subsidiaries.
All of our executive officers devote substantially all of their time to managing our businesses and affairs, but from time
to time certain executive officers perform services for our affiliate, Global Petroleum Corp. or other entities controlled by the
Slifka family. Please read Part III, Item 13, “Certain Relationships and Related Transactions, and Director Independence—
Relationship of Management with Global Petroleum Corp.” Our non‑management directors devote as much time as is necessary
to prepare for and attend board of directors and committee meetings.
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Set forth below are the names, ages (as of March 4, 2020) and titles of persons currently serving as directors and
executive officers of our general partner:
Name
Richard Slifka
Eric Slifka
Andrew Slifka
Mark A. Romaine
Daphne H. Foster
Edward J. Faneuil
Matthew Spencer
David K. McKown
Robert J. McCool
Kenneth I. Watchmaker
John T. Hailer
Age Position with Global GP LLC
79 Chairman
54 President, Chief Executive Officer and Vice Chairman
51 Executive Vice President and Director
51 Chief Operating Officer
62 Chief Financial Officer and Director
67 Executive Vice President, General Counsel and Secretary
41 Chief Accounting Officer
82 Director
81 Director
77 Director
59 Director
Richard Slifka was elected Vice Chairman of the Board of our general partner in March 2005 and became Chairman in
March 2014. He had been employed with Global Companies LLC or its predecessors since 1963. Mr. Slifka served as Treasurer
and a director of Global Companies LLC since its formation in December 1998. Mr. Slifka also is a shareholder, a director and
the President of Global Petroleum Corp., a privately held affiliated company that had owned, operated and leased to us our
petroleum products storage terminal located in Revere, Massachusetts until we acquired the terminal in January 2015. Mr. Slifka
is a past director of the New England Fuel Institute and currently serves as president of the Independent Fuel Terminal Operators
Association. He also currently serves on the board of directors of St. Francis House and the board of trustees of Boston Medical
Center. Mr. Slifka served as a director of the National Multiple Sclerosis Society from 1988 through December 31, 2019.
Mr. Slifka’s extensive knowledge of the oil industry in general and of our history, customers and suppliers make him uniquely
qualified to serve as our Chairman of the Board. Richard Slifka is the brother of the late Alfred A. Slifka.
Eric Slifka was elected President, Chief Executive Officer and director of Global GP LLC, the general partner of Global
Partners LP, in March 2005 and became Vice Chairman in March 2014. He has been employed with Global Companies LLC or
its predecessors since 1987. Mr. Slifka served as President and Chief Executive Officer and a director of Global Companies LLC
since July 2004 and as Chief Operating Officer and a director of Global Companies LLC from its formation in December 1998 to
July 2004. Prior to 1998, Mr. Slifka held various senior positions in the accounting, supply, distribution and marketing
departments of the predecessors to Global Companies LLC. He is a member of the National Petroleum Council and serves on the
board of directors of the Energy Policy Research Foundation, Inc. and Massachusetts General Hospital President’s Council.
Mr. Slifka is the son of the late Alfred A. Slifka and the nephew of Richard Slifka.
Andrew Slifka was elected to serve as a director of our general partner in April 2012 and has been serving as Executive
Vice President of Global Partners LP since March 2012 and President of Alliance Energy LLC and its predecessor Alliance
Energy Corp. since November 2007. He has been employed with Alliance since 1999. Mr. Slifka served as Vice President and
General Manager for the Northeast region (RI, MA, NH, and ME) of Alliance Energy Corp. from 1999 to 2003 and as Executive
Vice President from 2003 to November 2007. From 1991 to 1999 Mr. Slifka held various positions in the supply, distribution, and
marketing departments with the predecessor of Global Companies LLC, Global Petroleum Corp. He serves on the boards of
directors of NECSEMA (New England Convenience Store & Energy Marketers Association), the National Multiple Sclerosis
Society, the CF & MS Fund Foundation Inc. and is on the board of trustees of The Rivers School. Mr. Slifka is the son of Richard
Slifka and the nephew of the late Alfred A. Slifka.
Mark A. Romaine has been Chief Operating Officer of Global Partners LP since July 2013. Mr. Romaine served as the
Senior Vice President of Light Oil Supply and Distribution for Global Partners LP from 2006 until June 2013. He joined
a predecessor company to Global Companies LLC
in 1998 as Premium Fuels Marketing Manager. His experience in the petroleum products industry includes operations and
marketing positions with Plymouth, MA-
based Volta Oil. Mr. Romaine received a bachelor’s degree from Providence College and
an MBA from the University of Massachusetts.
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Daphne H. Foster was elected to serve as a director of our general partner in May 2016 and has been Chief Financial
Officer of Global Partners LP since July 2013. Ms. Foster served as Treasurer of Global Partners LP from 2010 until June 2013.
She joined the Partnership in 2007. Her experience in the petroleum products industry includes several years as a Vice President
in the Energy and Utilities Division of Bank of Boston. She started her banking career in 1982 at Bank of Boston and later joined
Citizens Financial Group, where she oversaw the Loan Officer Development Program. Ms. Foster received a bachelor's degree
and an MBA from Boston University.
Edward J. Faneuil was elected Executive Vice President, General Counsel and Secretary of our general partner in
March 2005. He has been employed with Global Companies LLC or its predecessors since 1991. Mr. Faneuil served as General
Counsel and Secretary of Global Companies LLC since its formation in December 1998. He previously served as Executive Vice
President, Secretary, and General Counsel of Alliance Energy LLC (now a wholly owned subsidiary of Global Partners LP). He
currently serves as Executive Vice President, General Counsel and Secretary of Global Petroleum Corp. and Montello Oil
Corporation. Mr. Faneuil received a bachelor’s degree from Trinity College and a J.D. from Suffolk University Law School.
Matthew Spencer was appointed by the Board of Directors of the general partner to serve as the Chief Accounting
Officer of Global Partners LP commencing January 1, 2018. Mr. Spencer served as Controller of the general partner from
September 2012 through December 2017. Mr. Spencer joined the Partnership from SharkNinja Operating LLC (formerly Euro-
Pro Operating LLC), where he served as Assistant Controller. Prior to that, he was a Senior Manager at Ernst & Young.
David K. McKown was elected to serve as a director of our general partner and as a member of the conflicts,
compensation and audit committees of the board of directors of our general partner in October 2005. He has been a Senior
Advisor to the Bank Loan Fund of Eaton Vance Management, whose principal business is creating, marketing and managing
investment funds and providing investment management services to institutions and individuals, since 2000. In this capacity he
serves as a credit analyst and a research source for many of the changes in the accounting area, such as marked to market
valuations, changes in bank lending rules and understanding of new financial products and derivatives. Mr. McKown retired in
March 2000 having served as a Group Executive with BankBoston since 1993. Mr. McKown has been in the banking industry for
over 40 years, where he acquired extensive accounting, financial structuring and negotiation skills, having worked at BankBoston
for over 33 years as a Senior Credit Officer, the head of a workout unit, the head of BankBoston’s energy lending group and the
head of BankBoston’s real estate and corporate finance departments. He also was a managing director of BankBoston’s private
equity unit. Mr. McKown has served on the boards of four public companies and four private companies in a variety of industries.
He currently serves as a director of Safety Insurance Group and several private companies. Mr. McKown previously served as a
member of the board of directors of Equity Office Properties. Mr. McKown’s extensive financial expertise and longstanding work
in BankBoston’s energy practice make him well qualified to serve as a director of our general partner.
Robert J. McCool was elected to serve as a director of our general partner, the chair of the conflicts committee of the
board of directors of our general partner, and a member of the compensation and audit committees of the board of directors of our
general partner in October 2005. He had served as an Advisor to Tetco Inc., a privately held company in the energy industry, for
15 years and has been in the refined petroleum industry for over 40 years. He worked for Mobil Oil for 33 years in various
positions including manager, planning and financial analysis, controller, manager U.S. lubricants operations and manager, budget
and controls for U.S. acquisitions. Mr. McCool retired in 1998 having served as Executive Vice President responsible for Mobil
Oil’s North and South America marketing and refining business. Mr. McCool’s extensive experience with the financial,
accounting and managerial aspects of the refined petroleum products industry make him well qualified to serve as a director of
our general partner.
Kenneth I. Watchmaker was elected to serve as a director of our general partner, a member of the conflicts and
compensation committees of the board of directors of our general partner, and chair of the audit committee of the board of
directors of our general partner in October 2005. He subsequently became chair of our general partner's compensation committee
as well. He served as Executive Vice President and Chief Financial Officer of Reebok International Ltd. from 1995 until March
2006. Mr. Watchmaker joined Reebok International Ltd. in July 1992 as Executive Vice President, Operations and Finance, of the
Reebok Brand. Prior to joining Reebok International Ltd., he was an audit partner at Ernst & Young LLP, where he had various
responsibilities including regional partner in charge of merger and acquisition
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services, regional partner in charge of bankruptcy and insolvency services, regional partner in charge of audit services and
regional partner in charge of retail industry services. Mr. Watchmaker also serves as a director and the chair of the audit
committee of American Biltrite Inc. Mr. Watchmaker's broad audit and accounting experience, as well as his significant corporate
and financial experience, make him a valuable member of our board of directors.
John T. Hailer was elected to serve as a director of our general partner and as a member of the conflicts, compensation
and audit committees of the board of directors of our general partner in July 2018. He has been President of the 1251 Asset
Management division of 1251 Capital Group, a Boston-based financial services company that owns a concentrated group of
companies in the asset management and insurance sectors. Prior to joining 1251 Capital Group, he spent more than 18 years at
Natixis Investment Managers (formerly Natixis Global Asset Management; “Natixis”) and joined that firm in 1999. Mr. Hailer
formerly served as Natixis’ President and Chief Executive Officer for the Americas and Asia, where he helped that company
strategically reposition as a global solutions provider and grow to become one of the world’s largest asset managers. Before
joining Natixis Investment Managers, Mr. Hailer was responsible for new business development in North and Latin America at
Fidelity Investments Institutional Services Company and was director of retail business development for Putnam Investments. He
serves as a trustee on several other boards including Boston Medical Center and the Boston Public Library. Mr. Hailer also serves
as the Chairman of the Board for each of the New England Council and the Back Bay Association. Mr. Hailer previously served
as a member of Beloit College’s Board of Trustees. Mr. Hailer’s broad experience in the financial services industry, as well as his
significant capital markets and financial experience, will make him a valuable member of our board of directors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors and executive officers of our general partner and
persons who beneficially own more than 10% of a class of our equity securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934 (“Reporting Persons”) to file certain reports with the SEC and the NYSE concerning their beneficial
ownership of such securities. Based solely upon a review of the copies of reports on Forms 3, 4 and 5 and amendments thereto
furnished to us, or written representations that no reports on Form 5 were required, we believe that all Reporting Persons
complied with all Section 16(a) filing requirements in the year ended December 31, 2019, with the exception of one Form 4 for
Mr. Eric Slifka (with respect to the transfer of common units by a non-Reporting Person to certain family trusts for which Mr.
Slifka serves as trustee).
Executive Sessions
The board of directors of our general partner holds executive sessions for the non‑management directors on a regular
basis without management present. Since the non‑management directors include directors who are not independent directors, the
independent directors also meet in separate executive sessions without the other directors or management at least once each year
to discuss such matters as the independent directors consider appropriate. In addition, any director may call for an executive
session of non‑management or independent directors at any board meeting. A majority of the independent directors selects a
presiding director for any such executive session.
Communications with Unitholders, Employees and Others
Unitholders, employees and other interested persons who wish to communicate with the board of directors of our general
partner, non‑management or independent directors as a group, a committee of the board or a specific director may do so by
transmitting correspondence addressed to the Board of Directors, Name of Director, Group or Committee, c/o Corporate
Secretary, Global Partners LP, P.O. Box 9161, 800 South Street, Suite 500, Waltham, MA 02454‑9161, Fax: 781‑398‑9211.
Letters addressed to the board of directors of our general partner in general will be reviewed by the corporate secretary
and relayed to the chairman of the board or the chair of the appropriate committee. Letters addressed to the non‑management or
independent directors in general will be relayed unopened to the chair of the audit committee. Letters addressed to a committee of
the board of directors or a specific director will be relayed unopened to the chair of the committee or the specific director to
whom they are addressed. All letters regarding accounting, accounting policies,
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internal accounting controls and procedures, auditing matters, financial reporting processes or disclosure controls and procedures
are to be forwarded by the recipient director to the chair of the audit committee.
Code of Ethics
Our general partner has adopted a code of business conduct and ethics that applies to all officers, directors and
employees of our general partner, including the principal executive officer, principal financial officer and principal accounting
officer, and to our subsidiaries and their officers, directors and employees.
A copy of the code of business conduct and ethics is available on our website at www.globalp.com or may be obtained
without charge upon written request to the General Counsel at: Global Partners LP, P.O. Box 9161, 800 South Street, Suite 500,
Waltham, MA 02454‑9161.
Corporate Governance Matters
The NYSE requires the Chief Executive Officer of each listed company to certify annually that he is not aware of any
violation by the company of the NYSE corporate governance listing standards as of the date of the certification, qualifying the
certification to the extent necessary. The Chief Executive Officer of our general partner provided such certification to the NYSE
in 2019.
The certifications of our general partner’s Chief Executive Officer and Chief Financial Officer required by the Securities
Exchange Act of 1934 are included as exhibits to this Annual Report on Form 10‑K.
Item 11. Executive Compensation.
All of our executive officers and substantially all of our employees are employed by our general partner, except for our
gasoline station and convenience store employees who are employed by Global Montello Group Corp. (“GMG”), and certain
union personnel. Our general partner does not receive any management fee or other compensation for its management of Global
Partners LP. Our general partner and its affiliates are reimbursed for expenses incurred on our behalf. These expenses include the
costs of employee, executive officer and director compensation and benefits properly allocable to Global Partners LP. Our
partnership agreement provides that our general partner will determine the expenses that are allocable to Global Partners LP.
Compensation Discussion and Analysis
We are managed and operated by the executive officers of our general partner. Executive officers of our general partner
receive compensation in the form of base salaries, short-term incentive awards (contractual and/or discretionary) and long-term
incentive awards. They also are eligible to participate in employee benefit plans and arrangements sponsored by our general
partner or its affiliates, including plans that may be established by our general partner or its affiliates in the future. Our named
executive officers (defined below) serve as executive officers of our general partner and each of our wholly-owned subsidiaries.
The compensation described herein reflects their total compensation for services to us, our general partner and our subsidiaries.
Our “named executive officers” include Mr. Eric Slifka, our Chief Executive Officer (“CEO”), Ms. Daphne H. Foster,
our Chief Financial Officer (“CFO”), Mr. Mark A. Romaine, our Chief Operating Officer (“COO”), and the three most highly
compensated executive officers of our general partner other than our CEO, CFO and COO during 2019, who were Mr. Andrew
Slifka, our Executive Vice President and President of our Gasoline Distribution and Station Operations Division (“GDSO”),
Mr. Edward J. Faneuil, our Executive Vice President, General Counsel and Secretary, and Mr. Matthew Spencer, our Chief
Accounting Officer. Each of our named executive officers had an employment agreement with our general partner during 2019.
The compensation committee of the board of directors of our general partner (the “Compensation Committee”) has
direct responsibility for the compensation of our CEO based upon (i) contractual obligations pursuant to any employment
agreement or arrangement between our CEO and our general partner, and (ii) compensation parameters
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established by the Compensation Committee with respect to salary adjustments, incentive plans and discretionary bonuses, if any.
The Compensation Committee also has oversight and approval authority for the compensation of our named executive officers
other than our CEO based upon our CEO's recommendations, including awards under any incentive plans in which the named
executive officers participate, and our general partner's contractual obligations pursuant to any employment agreements or
arrangements with our named executive officers.
Compensation Objectives
The objectives of our compensation program with respect to our named executive officers are to attract, engage and
retain individuals with the requisite knowledge, experience and skill sets required for our future success. Our compensation
program is intended to motivate and inspire employee behavior that fosters high performance, and to support our overall business
objectives. To achieve these objectives, we aim to provide each named executive officer with a competitive total compensation
program. We currently utilize the following compensation components:
· Base salaries and benefits designed to attract and retain high caliber employees;
· Short-term, performance-based incentives and discretionary bonus awards designed to focus employees on key
business objectives for a particular year; and
· Long-term, equity-based and/or cash incentive awards designed to support the achievement of our long-term business
objectives and the retention of key personnel.
Compensation Methodology
Our general partner uses a third-party compensation consultant to study and supply market compensation data and to
assist our management and the Compensation Committee in formulating competitive compensation plans and arrangements. The
Compensation Committee retained BDO USA, LLP (“BDO”) as its outside compensation consultant during 2019.
Under our executive compensation structure, our goal is for our named executive officers’ total compensation to fall
th
between the median (50 percentile) and 75 percentile of competitive total compensation levels, as identified by BDO's
benchmarking results, following any adjustments made to marketplace pay levels in order to account for significant
responsibilities that are assigned to our named executive officers and that exceed the scope of responsibilities generally associated
with the external benchmark positions to which they are compared, specifically:
th
· Our Executive Vice President, General Counsel and Secretary plays a critical role in our major transactions and
strategic business initiatives, serves as a trusted business advisor to our executive officers, and is responsible for all
of our environmental compliance functions, as well as serving as our top legal executive; and
· Our Executive Vice President who also serves as President of our GDSO Division has executive responsibilities as
well as primary oversight of our gasoline and convenience store business.
Overall Partnership performance and individual performance may cause the targeted compensation levels to be adjusted up or
down accordingly.
BDO worked with the Compensation Committee in 2019 to (i) review and update our reference group of peer companies
for analysis of metrics used in the assessment of our performance; (ii) help determine the award opportunities provided to our
named executive officers; (iii) assist with compensation information related to the 2019 Form 10-K; (iv) update information on
methods and levels of compensation for our independent board members; (v) assist with updated information for a new three-year
employment agreement for our CEO; (vi) measure our performance and that of our CEO in order to determine what our CEO
earned under the long-term performance-based cash incentive plan under his 2018 employment agreement; and (vii) provide
updated performance targets and related award levels for our named executive officers under our general partner’s short-term
incentive plan (the “STIP”) for 2019. The plan design of our 2020 STIP, which is comprised of a 50% performance-based
component and a 50% discretionary component, is the same as that of our 2019 STIP, except for adjustments to the performance
target levels thereunder.
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During 2018, BDO worked with the Compensation Committee to (i) review and update our reference group of peer
companies for performance assessment purposes; (ii) establish competitive compensation plans for our named executive officers;
(iii) identify appropriate terms of a new three-year employment agreement for our CEO and for each of our other named
executive officers; (iv) develop a new long-term incentive plan, including performance metrics, and the determination of awards
opportunities for our named executive officers and plan administration procedures; and (v) prepare the performance targets and
associated levels of payouts contained in our STIP for 2018.
During 2017, BDO worked with the Compensation Committee to review and update (i) our reference group of peer
companies for compensation benchmarking purposes; (ii) the methodology for measuring our short-term performance; and
(iii) the performance targets and associated levels of payouts previously contained in our 2017 STIP.
Highlights of Compensation Program Policies for Named Executive Officers
· A significant portion of total direct compensation for our named executive officers is variable, dependent upon the
Partnership’s actual performance (e.g., short-term, performance-based incentives and long-term, cash-based or
equity-based incentives);
· Repricing of options and unit appreciation rights is prohibited unless approved by unitholders; and
· The Compensation Committee engages the assistance of an independent compensation consultant.
Elements of Compensation
Our executive compensation structure utilizes complementary components to align our compensation with the needs of
our business and to provide for desired levels of pay that competitively compensate our executive management personnel. We
administer the program on the basis of total compensation. As described above, our goal is to target total compensation levels
(i.e., base salary plus short- and long-term incentives) for our named executive officers to fall between the median
(50th percentile) and 75th percentile compensation levels in our competitive marketplace. When we perform above or below our
performance goals, we expect that result will be reflected in our compensation levels.
The elements of the 2019 executive officer compensation of our general partner were base salaries, short-term incentive
awards, long-term cash incentive awards, retirement, deferred compensation and health benefits, and perquisites consistent with
those provided to executive officers generally and as may be approved by the Compensation Committee from time to time.
A description of the components of the compensation program and principles used to guide their administration appears
below:
Base Salaries
Each named executive officer’s base salary is a fixed component of compensation for each year. Base salary is designed
to compensate executives for the responsibility of the level of the position they hold and sustained individual performance
(including experience, scope of responsibility, results achieved and future potential). Historically, the base salaries for our named
executive officers with employment agreements have been set by the terms of their respective employment agreements in effect
from time to time while the base salary for the named executive officer without an employment agreement has been set in
accordance with our CEO’s recommendation, using salary range information from BDO, and as approved by the Compensation
Committee. The annualized base salaries in effect as of the end of 2019 for our named executive officers were as follows:
$1,000,000 for Mr. Eric Slifka, $575,000 for Mr. Romaine; $500,000 for Mr. Faneuil; $500,000 for Ms. Foster; $475,000 for
Mr. Andrew Slifka; and $275,000 for Mr. Spencer.
Short-Term Incentive Plans
Our general partner established a cash bonus pool for 2019 to fund short-term incentive awards for each of our named
executive officers. Target awards under our general partner’s 2019 STIP included a performance-based component, for which
50% of the cash bonus pool was available (the “STIP Performance Component”), and a
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discretionary component, for which the other 50% of the cash bonus pool was available (the “STIP Discretionary Component”).
Incentive awards earned under the 2019 STIP were based on the Partnership’s actual performance in relation to a specified
objective for distributable cash flow established by the Compensation Committee in March 2019 (the “DCF objective”). Under
the 2019 STIP, for purposes of determining whether a specified target was achieved, “distributable cash flow” (a non-GAAP
financial measure used by management) means our net income plus depreciation and amortization, less our maintenance capital
expenditures (“DCF”), as adjusted by the Compensation Committee in its discretion to account for unusual, one-time factors that
occurred during the year and could have increased or decreased DCF. DCF is discussed under “Results of Operations—
Evaluating Our Results of Operations” and reconciled to its most directly comparable GAAP financial measures under “Results
of Operations—Key Performance Indicators” in Part II, Item 7, “Management's Discussion and Analysis of Financial Conditions
and Results of Operations.”
Under the 2019 STIP, each of our named executive officers was assigned an incentive target value expressed as a
percentage of his or her base salary. The 2019 incentive target values were: 100% (or $1,000,000) for Mr. Eric Slifka; 100% (or
$575,000) for Mr. Romaine; 100% (or $500,000) for Mr. Faneuil; 100% (or $500,000) for Ms. Foster; 70.5% (or $335,000) for
Mr. Andrew Slifka; and 72.7% (or $200,000) for Mr. Spencer. 50% of the incentive target value for each named executive officer
was allocated to his or her STIP Performance Component and 50% was allocated to his or her STIP Discretionary Component.
STIP Performance Component (50% of the incentive target value).—Under the terms of the 2019 STIP, 100% of the
STIP Performance Component is earned when the DCF objective is achieved. However, the 2019 STIP also provides for an
increased payout under the STIP Performance Component when the DCF objective is exceeded, a reduced payout under the STIP
Performance Component when the DCF objective is not achieved but exceeds a certain DCF minimum threshold, and no payout
if the STIP Performance Component minimum threshold is not achieved. Such increases and reductions in payouts are determined
in accordance with an award payout grid adopted by the Compensation Committee at the time that the 2019 STIP was established.
In general, a minimum of 77% of the DCF objective must have been achieved before participants earn any portion of the STIP
Performance Component. Under the 2019 STIP, a participant’s incentive opportunity increases to a maximum of 200% of the
STIP Performance Component at 120.9% of the DCF objective and is determined on a quantitative basis solely based on the
Partnership’s actual DCF for 2019. In 2019, the Partnership achieved DCF as adjusted, said adjustment having been approved by
the Compensation Committee, of $95.18 million, or 86.5% of the DCF objective set by the Compensation Committee for 2019.
Accordingly, our named executive officers were entitled to receive 19.83% of their respective STIP Performance Components,
specifically as follows: $99,150 for Mr. Eric Slifka; $57,011 for Mr. Romaine; $49,575 for Mr. Faneuil; $49,575 for Ms. Foster;
$33,215 for Mr. Andrew Slifka; and $19,830 for Mr. Spencer.
STIP Discretionary Component (50% of the incentive target value).—The STIP Discretionary Component is intended to
be used as a discretionary award, allowing the Compensation Committee to analyze other factors that it may elect to use for
determining the STIP Discretionary Component. Such factors may include, without limitation, market factors and significant
acquisitions, developments and ventures accomplished by us, management of our business in the face of adverse market
conditions and, as may be applicable, the contributions of any or all of the named executive officers. Mr. Eric Slifka’s evaluation
of our named executive officers’ performance in 2019 included the recognition that their individual and collective performance
were excellent; and that their efforts continue to position us to realize the benefits of a downstream integrated model, working
together to expand the use of our terminals and logistics capabilities, take advantage of market opportunities, and tighten
operations while reducing leverage, continuing to ensure ample liquidity, generating sufficient cash flow to cover
our distributions, and maintaining flexibility to invest in assets fundamental to our growth objectives.
In considering whether, and in what amount(s), to grant any or all of our named executive officers 2019 STIP
Discretionary Component awards, the Compensation Committee recognized that our business performance in 2019 exceeded our
full-year expectations, and that our named executive officers individually and collectively have continued to effectively oversee
development of activities and staffing consistent with our strategies and growth objectives. The following initiatives were
undertaken by us under the leadership of Mr. Eric Slifka and executed by our named executive officers to strategically position us
by strengthening our balance sheet and enhancing our liquidity in order to be in a
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position to invest in opportunities fundamental to our growth strategy. Our 2019 initiatives included:
· On April 19, 2019, we amended our credit agreement to, among other things, (i) extend the maturity date for its
working capital revolving credit facility and revolving credit facility from April 30, 2020 to April 29, 2022, and
(ii) reduce the applicable rate under its revolving credit facility by 0.25% for borrowings of base rate loans,
Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit.
· On July 31, 2019, we completed the private placement of an aggregate principal amount of $400.0 million of our
7.00% senior notes due 2027, the proceeds of which were used to (i) pay the full redemption of our 6.25% senior
notes due 2022, which redemption occurred on August 30, 2019, and (ii) repay a portion of the borrowings
outstanding under our credit agreement.
· Ongoing divestiture of non-strategic assets.
Taking into account Mr. Slifka’s assessment, the Partnership’s results of operations for 2019, as well as the
Compensation Committee’s review of the individual performance of each of our named executive officers in 2019, the
Compensation Committee awarded our named executive officers 100% of their respective STIP Discretionary Components for
2019, specifically as follows: $500,000 for Mr. Eric Slifka; $287,500 for Mr. Romaine; $250,000 for Mr. Faneuil; $250,000 for
Ms. Foster; $167,500 for Mr. Andrew Slifka; and $100,000 for Mr. Spencer.
2020 Short-Term Incentive Plan.—In 2020, the Compensation Committee, with the assistance of BDO, used our 2020
business plan as a basis for creating the 2020 Short-Term Incentive Plan. The 2020 STIP establishes a target incentive percentage
for each of our named executive officers ranging from 71% to 100% of base salary representing the same target percentages used
during 2019 for each of the 2019 STIP participants. Awards under the 2020 STIP may range from 0% to 200% of each
participant’s target incentive percentage. The weighting of the STIP Performance Component and STIP Discretionary Component
in the 2020 STIP remain 50% and 50%, respectively, the same as in the 2019 STIP.
·
·
The 2020 Performance Component (50% of the incentive target value)—The Compensation Committee increased
the DCF objective for 2020, subject to adjustment by the Compensation Committee for certain acquisitions and
events during 2020 that the Compensation Committee may, in its sole discretion, determine to have caused unusual,
one-time increases or decreases in DCF. Awards granted by the Compensation Committee may range from 0% to
200% of a plan participant’s 2020 STIP Performance Component. A minimum of 81% of the 2020 DCF objective
must be achieved before participants would earn any portion of the 2020 STIP Performance Component. Under the
2020 STIP, a participant’s incentive opportunity increases to a maximum of 200% of the 2020 STIP Performance
Component at 120% of the 2020 DCF objective, and is determined on a quantitative basis solely based on our actual
DCF for 2020.
The 2020 Discretionary Component (50% of the incentive target value)—The Compensation Committee has
discretion in determining the 2020 STIP Discretionary Component for any participant under the 2020 STIP, within a
range of 0% to 200% of the 2020 STIP Discretionary Component, and based upon (i) the Compensation
Committee’s consideration of management's performance over the course of the 2020 plan year; (ii) the CEO’s
assessment of the other named executive officers; (iii) our overall financial results for the year in relation to our
business plan; and (iv) any significant mitigating factor(s) that may have influenced a plan participant’s
performance, positively or negatively. The objective of considering these factors is to arrive at a decision that best
reflects the Compensation Committee’s overall assessment of management's performance on an individual basis.
The Compensation Committee believes that when combined with the STIP Performance Component, the results will
more accurately reflect a plan participant's performance in light of the relevant factors.
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Annual Bonuses—Discretionary
Our compensation program for named executive officers contains a provision for the Compensation Committee to award
a discretionary bonus to recognize significant contributions made by an executive in the course of the year. These are one-time
awards and not associated with any of our incentive plans. The Compensation Committee may make discretionary bonus awards
to our CEO. Our CEO may also recommend discretionary bonus awards for any or all other named executive officers for
consideration and approval by the Compensation Committee for similar purposes.
The Compensation Committee did not award any discretionary bonus payments under this program in respect of our
named executive officers’ service during 2019, 2018 or 2017.
Long-Term Cash Incentive Awards
Long-Term Cash Incentive Plans—The Global Partners LP 2018 Long-Term Cash Incentive Plan (as amended from time
to time, the “LTCIP”) allows the board of directors of our general partner or the Compensation Committee to grant cash incentive
awards (collectively, the “LTCIP Awards”) to independent directors of our general partner or employees (including our named
executive officers) who provide services to the Partnership or its affiliates in recognition of their respective contributions to our
financial results.
Once a portion of an LTCIP Award vests, it is paid to the recipient as soon as practicable thereafter. If a named
executive officer’s employment with our general partner is terminated for any reason, the Compensation Committee will
generally have sole discretion to determine whether any or all of the unvested portion of such named executive officer’s LTCIP
Award(s) shall become vested, forfeited, or shall continue to vest pursuant to its terms as if the named executive officer’s service
had continued through the last applicable vesting date. Upon the occurrence of a Change of Control (as defined in the LTCIP), the
unvested portion of such named executive officer’s LTCIP Award(s) shall immediately become fully vested.
On August 7, 2019, the board of directors of our general partner granted awards under the LTCIP to our named
executive officers (each, a “2019 LTCIP Award”) in the following amounts: $1,200,000 for Mr. Eric Slifka; $1,000,000 for
Mr. Romaine; $850,000 for Mr. Faneuil; $850,000 for Ms. Foster; $500,000 for Mr. Andrew Slifka; and $275,000 for
Mr. Spencer. Each 2019 LTCIP Award is subject to the following vesting schedule: 33.4% of the award vests on August 10,
2021, 33.3% of the award vests on August 10, 2022 and 33.3% of the award vests on August 10, 2023, subject to each named
executive officer’s continued employment through such vesting dates.
On October 8, 2018, the board of directors of our general partner granted awards under the LTCIP to our named
executive officers (each, a “2018 LTCIP Award”) in the following amounts: $2,700,000 for Mr. Eric Slifka; $900,000 for
Mr. Romaine; $750,000 for Mr. Faneuil; $750,000 for Ms. Foster; $400,000 for Mr. Andrew Slifka; and $275,000 for
Mr. Spencer. Each 2018 LTCIP Award is subject to the following vesting schedule: 20% of the award vests on October 1, 2021,
30% of the award vests on October 1, 2022 and 50% of the award vests on October 1, 2023, subject to each named executive
officer’s continued employment through such vesting dates.
Long-Term Performance-Based Cash Incentive Plan Awards for Mr. Eric Slifka—Mr. Eric Slifka’s prior employment
agreement with our general partner that was in effect during 2018 and January 2019 included a provision for a long-term
performance-based cash incentive plan covering the period from March 29, 2018 through March 29, 2019 (the “2018 Long-Term
Performance-Based Cash Incentive Plan”). The 2018 Long-Term Performance-Based Cash Incentive Plan was designed with two
separate components: 50% of the award is based upon the Partnership’s total unitholder (or shareholder) return (“TSR”), as
compared against the TSRs of the individual entities comprising two groups of constituent companies (the “Constituent
Companies”), for a defined twelve month period of time, and 50% of the award is discretionary, as determined by the
Compensation Committee based upon its evaluation of the Mr. Eric Slifka’s performance and such external factors as the
Compensation Committee deems appropriate. On April 12, 2019, the Compensation Committee determined that Mr. Eric Slifka
earned $2,025,000 under the performance component and $675,000 under the discretionary component, for a total award of
$2,700,000. Amounts earned pursuant to the 2018 Long-Term Performance-Based Cash Incentive Plan are to be paid in two equal
installments in each of January 2020 and 2021, subject to Mr. Eric Slifka’s continued employment on those dates.
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Long-Term Equity Incentive Awards
2017 Phantom Unit Awards.—On August 16, 2017, the Compensation Committee approved the grant of phantom unit
awards (collectively, the “2017 Phantom Unit Awards”) pursuant to phantom unit award agreements (each, a “Phantom Unit
Agreement”) under the Global Partners LP Long-Term Incentive Plan (as amended from time to time, the “LTIP”) to each of our
named executive officers who had an employment agreement with us during 2017. Each 2017 Phantom Unit Award is subject to
the following vesting schedule: 25% of the phantom units subject to such award vests on August 1, 2020, 35% of the phantom
units subject to such award vests on August 1, 2021 and 40% of the phantom units subject to such award vests on August 1, 2022.
If a named executive officer’s employment with our general partner is terminated (a) by our general partner for Cause
(as defined in such named executive officer’s employment agreement), or (b) by the named executive officer voluntarily (other
than due to retirement), all unvested phantom units subject to such named executive officer’s 2017 Phantom Unit Award will
immediately be forfeited without payment. If a named executive officer’s employment with our general partner is terminated for
any other reason, the Compensation Committee will generally have sole discretion to determine whether any or all of the unvested
phantom units subject to such named executive officer’s 2017 Phantom Unit Award will become vested or forfeited. Upon the
occurrence of a Change of Control (as defined in a named executive officer’s employment agreement), all unvested phantom units
subject to such named executive officer’s 2017 Phantom Unit Award will immediately become vested.
Upon vesting of the 2017 Phantom Unit Awards, phantom units will be settled in our common units unless the
Compensation Committee decides, in its sole discretion, to settle such phantom units in cash or a combination of common units
and cash.
Retirement and Health Benefits; Perquisites
Global Partners 401(k) Savings and Profit Sharing Plan
The Global Partners LP 401(k) Savings and Profit Sharing Plan (the “Global 401(k) Plan”) permits all eligible
employees to make voluntary pre-tax contributions to the plan, subject to applicable tax limitations. The Global 401(k) Plan
provides for employer matching contributions equal to 100% of elective deferrals up to the first 3% of eligible compensation plus
50% of elective deferrals up to the next 2% of eligible compensation. In 2019, all employees were eligible to participate in the
Global 401(k) Plan other than employees who were (1) not yet 21 years of age, (2) covered by a collective bargaining agreement
that does not provide for employees to be covered by the Global 401(k) Plan or (3) nonresident aliens. New employees may begin
to contribute to the Global 401(k) Plan on the first day of the month following their respective dates of hire, although they are not
eligible to receive matching payments under the Global 401(k) Plan until they have been employed by our general partner or one
of our operating subsidiaries for six months. Eligible employees may elect to contribute up to 100% of their compensation to the
plan for each plan year. Employee contributions are subject to annual dollar limitations, which are adjusted periodically for
changes in the cost of living. Participants in the plan are always fully vested in any matching contributions under the plan;
however, discretionary profit sharing contributions are subject to a six-year vesting schedule. The plan is intended to be tax-
qualified under Section 401(a) of the Code so that contributions to the plan, and income earned on plan contributions, are not
taxable to employees until withdrawn from the plan, and so that our general partner's contributions, if any, will be deductible
when made.
Pension Benefits
Each of our named executive officers, other than Mr. Spencer, is eligible to participate in our general partner's pension
plan in accordance with our general partner’s policies and on the same general basis as other employees of our general partner.
Under our general partner’s pension plan, an employee becomes fully vested in his or her pension benefits after completing five
years of service or, if earlier, upon termination due to death or disability. Please read “Other Benefits—Pension Benefits” for
information with respect to eligibility standards and calculations of estimated annual pension benefits payable upon retirement
under the pension plan. Our general partner’s pension plan was frozen on December 31, 2009.
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Prior to March 1, 2012, Mr. Andrew Slifka was employed by Alliance Energy LLC (“Alliance”) and participates in the
Alliance Energy LLC Pension Plan in accordance with Alliance’s policies and on the same general basis as other employees of
Alliance not excluded by the terms of the plan. On March 1, 2012, sponsorship of the Alliance Energy LLC Pension Plan was
transferred to GMG and the plan was renamed as the GMG Pension Plan (as defined and described below under “Other Benefits
—Pension Benefits”). An employee is fully vested in benefits under the GMG Pension Plan after completing five years of service
or, if earlier, upon termination due to death or disability. Please read “Other Benefits—Pension Benefits” for information with
respect to eligibility standards and calculations of estimated annual pension benefits payable upon retirement under the GMG
Pension Plan. The GMG Pension Plan was frozen on May 15, 2012.
Other Benefits
Each of our named executive officers is eligible to participate in our general partner's health insurance plans and other
employee benefit plans in accordance with our general partner’s policies and on the same general basis as other employees of our
general partner.
Additional perquisites for our named executive officers may include payment of premiums for long-term disability
insurance, automobile fringe benefits, club membership dues and payment of fees for professional financial planning, tax and/or
legal advice.
Employment Agreements
Our CEO, Mr. Eric Slifka, entered into a new two-year, eleven-month employment agreement with our general partner
effective as of February 1, 2019. Each of our named executive officers other than our CEO entered into a new three-year
employment agreement with our general partner effective as of January 1, 2019. We believe that the post-termination and change
in control payments in the employment agreements allowed our named executive officers to focus on making business decisions
that maximized our interests and the interests of our unitholders without allowing personal considerations to influence the
decision-making process. Please read “Potential Payments upon Termination or Change of Control” for a discussion of the
provisions in each employment agreement relating to termination, change in control and related payment obligations.
Relationship of Compensation Elements to Compensation Objectives
We use base salaries to provide financial stability and to compensate our executive officers for fulfillment of their
respective job duties.
We use a short-term incentive plan with performance-based and discretionary components to align a significant portion
of our executive officers’ compensation with annual business performance and success, and to provide rewards and recognition
for key business outcomes such as achieving increased quarterly distributions in line with our financial results, expanding our
distribution, marketing and sales of petroleum products, expanding our gasoline station and convenience store assets and the
geographic markets that we serve, and diversifying our product mix to enhance profitability and effectively managing our
business. Short-term performance-based incentives also allow flexibility to reward performance and individual success consistent
with such criteria as may be established from time to time by our CEO and the Compensation Committee.
Our long-term incentive plans (the LTIP, the LTCIP and, solely with respect to Mr. Eric Slifka, the 2018 Long-Term
Performance-Based Cash Incentive Plan) provide incentives and reward eligible participants for the achievement of long-term
objectives, facilitate the retention of key employees by aligning their incentives with our long-term performance, continue to
make our compensation mix more competitive, and align the interests of management with those of our unitholders.
We offer a mix of traditional perquisites such as automobile fringe benefits and country/golf club memberships, and
additional benefits, such as payment of professional financial planning and tax advice fees, that are tailored to address our
executive officers’ individual needs, to facilitate the performance of their job duties and to be competitive
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with the total compensation packages available to executive officers generally.
Tax Deductibility of Compensation
With respect to the deduction limitations imposed under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), we are a limited partnership and do not meet the definition of a “corporation” under Section 162(m).
Accordingly, such limitations do not apply to compensation paid to our named executive officers.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by
Item 402(b) of Regulation S-K with management. Based upon such review, the related discussions and such other matters deemed
relevant and appropriate by the Compensation Committee, the Compensation Committee has recommended to the board of
directors that the Compensation Discussion and Analysis be included in this Form 10-K.
Kenneth I. Watchmaker (Chairman)
Robert J. McCool
David McKown
John T. Hailer
March 5, 2020
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Compensation Committee Interlocks and Insider Participation
The Compensation Committee has been comprised of Robert J. McCool, David K. McKown and Kenneth I.
Watchmaker since the formation of Global GP LLC. Effective July 1, 2018, John T. Hailer was appointed as a new member of the
board of directors of our general partner and the fourth member of the Compensation Committee. None of the members of the
Compensation Committee are officers or employees of our general partner or any of its affiliates. Mr. Richard Slifka has served as
Chairman of our general partner’s board of directors since March 12, 2014 and previously served as Vice-Chairman of our
general partner’s board of directors since its inception. He is an employee of Global Petroleum Corp., an entity which is owned by
Mr. Richard Slifka and a trust for the beneficiaries of his late brother, Mr. Alfred A. Slifka. Mr. Eric Slifka, who is Mr. Alfred A.
Slifka’s son, has served as Vice-Chairman of our general partner’s board of directors since March 12, 2014.
Compensation of Named Executive Officers
The following table sets forth certain information with respect to compensation during 2019, 2018 and 2017 of our
named executive officers.
Name and Principal
Position
Eric Slifka
President and CEO
Mark A. Romaine
Chief Operating Officer
Edward J. Faneuil
EVP, General Counsel
and Secretary
Daphne H. Foster
Chief Financial Officer
Andrew Slifka
EVP and President of
GDSO Division
Matthew Spencer
Chief Accounting Officer
Year
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
Salary
($) (1)
1,000,000
800,000
800,000
575,000
500,000
500,000
500,000
450,000
450,000
500,000
450,000
450,000
475,000
425,000
425,000
275,000
265,000
Unit
Awards
($) (2)
—
—
2,743,315
—
—
1,062,201
—
—
850,012
—
—
902,071
—
—
575,011
—
—
Change in
Pension Value
and Deferred
Non‑‑Equity Nonqualified
Incentive Plan Compensation
Compensation
($) (3)
Earnings
($) (4)
All Other
Compensation
($) (5)
599,150
1,600,000
1,400,000
344,511
1,000,000
900,000
299,575
900,000
815,000
299,575
900,000
815,000
200,715
600,000
545,000
119,830
400,000
164,449
—
110,986
68,892
—
45,722
80,950
—
—
8,065
—
6,045
84,100
—
62,603
—
—
100,008
90,920
93,795
39,409
42,513
45,399
48,208
44,338
51,951
25,105
24,905
33,120
62,522
55,910
59,435
50,321
47,550
Total
($)
1,863,607
2,490,920
5,148,096
1,027,812
1,542,513
2,553,322
928,733
1,394,338
2,166,963
832,745
1,374,905
2,206,236
822,337
1,080,910
1,667,049
445,151
712,550
(1) Amounts reported in this column reflect the base salary earned by our named executive officers for services performed during the
applicable fiscal year.
(2) Amounts reported in this column reflect the aggregate grant date fair value of the phantom unit awards subject to time-based vesting
granted to our named executive officers under the LTIP during 2017, calculated in accordance with FASB ASC Topic 718. See the
section above titled “Elements of Compensation—Long-Term Equity Incentive Awards—2017 Phantom Unit Awards” for more
information.
(3) Amounts reported in this column reflect the bonuses paid to each of the named executive officers for services performed during 2019,
2018 and 2017, which were determined in accordance with our general partner’s Short-Term Incentive Plans described above under
“Elements of Compensation—Short-Term Incentive Plans." The amount reported in this column for Mr. Eric Slifka does not include
the $2,700,000 that he earned under his 2018 Long-Term Performance-Based Cash Incentive Award, which amount is payable in two
equal installments in January 2020 and January 2021, subject to his continued employment on such dates. See the section above
entitled Long-Term Cash Incentive Awards—Long-Term Performance-Based Cash Incentive Plan Awards for Mr. Eric Slifka for more
information.
(4) Mr. Spencer is not eligible to participate in our general partner’s pension plan because it was frozen prior to his commencement of
employment with us.
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(5) With respect to Mr. Eric Slifka, “All Other Compensation” for the years ended December 31, 2019, 2018 and 2017 includes, among
other things, (a) club membership dues, and (b) professional financial planning and tax advice fees, paid by us in the amounts of
$31,200 and $25,427, respectively, for 2019; $16,978 and $34,550, respectively, for 2018; and $0 and $30,900, respectively, for 2017.
The amounts in this column for 2019 are described further in the All Other Compensation table below.
All Other Compensation Table
The following table describes each component of the “All Other Compensation” column of the Summary Compensation
Table for the fiscal year ended December 31, 2019:
Employer
Contributions to
Global 401(k)
Club Membership Dues,
Legal Fees and
Professional
Personal
Name
Eric Slifka
Mark A. Romaine
Edward J. Faneuil
Daphne H. Foster
Andrew Slifka
Matthew Spencer
Plan ($)
11,000
11,200
11,200
11,200
11,000
11,550
Tax Advice Fees ($)
Financial Planning and Benefits Total All Other
Compensation ($)
100,008
39,409
48,208
25,105
62,522
50,321
($) (1)
32,381
28,209
19,361
13,905
29,072
38,771
56,627
—
17,647
—
22,450
—
(1) The amounts in this column include the estimated incremental cost of an automobile provided by us for the named executive officer’s
use; medical and dental premiums (or opt-out payments for declining coverage under our group healthcare policies) paid by us; and life
insurance and long-term disability premiums paid by us.
Grants of Plan-Based Awards
The following table sets forth the minimum threshold, target and maximum possible payout amounts, depending upon
our financial performance in 2019, with respect to the short-term cash incentive awards granted during 2019 to our named
executive officers under the STIP. With respect to the long-term cash incentive awards granted during 2019 to our named
executive officers under the LTCIP, we use competitive benchmark information developed by BDO and take into account our
performance, the applicable named executive officer’s performance and other compensation earned by such named executive
officer in 2019 to determine an award amount that may be earned by each named executive officer without reference to
“threshold”, “target” or “maximum” amounts.
Estimated Possible Payouts Under
Name
Eric Slifka
Mark A. Romaine
Edward J. Faneuil
Daphne H. Foster
Andrew Slifka
Matthew Spencer
Award Type
STIP
LTCIP
STIP
LTCIP
STIP
LTCIP
STIP
LTCIP
STIP
LTCIP
STIP
LTCIP
Non-Equity Incentive Plan Awards (1)(2)
Minimum
Threshold ($) Target ($)
120,000
—
69,000
—
60,000
—
60,000
—
40,200
—
24,000
—
1,000,000
—
575,000
—
500,000
—
500,000
—
335,000
—
200,000
—
Maximum ($)
2,000,000
—
1,150,000
—
1,000,000
—
1,000,000
—
670,000
—
400,000
—
(1)
For calendar year 2019, each named executive officer’s 2019 STIP award consisted of the STIP Performance Component (weighted
50%) and the STIP Discretionary Component (weighted 50%). Amounts shown represent the “threshold,” “target” and “maximum”
amounts payable under the STIP awards. During 2020, the Compensation Committee determined that slightly under twenty percent
(19.83%) of the STIP Performance Component and one hundred percent (100%) of the STIP Discretionary Component were earned by
the named executive officers for calendar year 2019. Actual payout of the STIP awards (the
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Performance Component and the Discretionary Component) for calendar year 2019 is shown in the “Non-Equity Incentive Plan
Compensation” column of the Summary Compensation Table above.
(2)
For each named executive officer who was granted a 2019 LTCIP Award, 33.4% of such award vests on August 10, 2021, another
33.3% of such award vests on August 10, 2022 and the final 33.3% of such award vests on August 10, 2023.
Outstanding Equity Awards at Fiscal Year End
The following table presents the full amount of the equity awards held by our named executive officers as of
December 31, 2019, which consist solely of phantom units granted under the LTIP. The awards shown on the table below were
the only equity awards held by the named executive officers at the end of the last fiscal year:
Unit Awards
Number of
Market Value of
Name
Eric Slifka
Mark A. Romaine
Edward J. Faneuil
Daphne H. Foster
Andrew Slifka
Matthew Spencer
Matthew Spencer
Grant Date
August 16, 2017 (1)
August 16, 2017 (1)
August 16, 2017 (1)
August 16, 2017 (1)
August 16, 2017 (1)
August 11, 2014 (2)
August 16, 2017 (1)
Units
That Have
Units That Have
Not Vested (#) Not Vested ($) (3)
3,301,805
1,278,446
1,023,060
1,085,717
692,073
70,600
240,731
163,780
63,415
50,747
53,855
34,329
3,502
11,941
(1) The phantom units granted on August 16, 2017 vest as to 25% of the award on August 1, 2020, another 35% of the award on August 1,
2021 and the final 40% of the award on August 1, 2022.
(2) The phantom units granted on August 11, 2014 vest over a six-year period, with one-third of the units having vested on August 1, 2018,
another one-third of the units scheduled to vest on August 1, 2019 and the final one-third of the units scheduled to vest on August 1,
2020.
(3) The market values of the phantom unit awards shown in the table above were calculated based on the closing price of $20.16 per
common unit on December 31, 2019.
Units Vested in the 2019 Fiscal Year
The following table presents phantom units awarded to the named executive officers that vested during the year ended
December 31, 2019:
Name
Eric Slifka (1)
Mark A. Romaine (1)
Edward J. Faneuil (1)
Daphne H. Foster (1)
Andrew Slifka (1)
Matthew Spencer (2)
Number of
Vested
Phantom Units (#)
42,419
19,004
25,452
7,295
9,845
2,599
Unit Awards
Market Value of Vested
Phantom Units ($)
837,351
375,139
502,422
144,003
194,340
51,602
(1)
(2)
The market values of these phantom units shown in the table above were calculated based on the closing price of $19.74 per common
unit on July 1, 2019, the vesting date of such phantom units.
848 of Mr. Spencer’s phantom units vested on July 1, 2019 and 1,751 of Mr. Spencer’s phantom units vested on August 1, 2019.
Hence, the market value of the Mr. Spencer’s phantom units shown in the table above were calculated based on the closing price of,
respectively, (a) $19.74 per common unit on July 1, 2019, and (b) $19.91 per common unit on August 1, 2019.
Nonqualified Deferred Compensation
On December 31, 2008, our general partner and Edward J. Faneuil entered into a deferred compensation
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agreement pursuant to which Mr. Faneuil will be subject to terms and conditions relating to confidential information, non-
solicitation and non-competition, as provided therein (the “Global Deferred Compensation Agreement”). Please read “Potential
Payments upon Termination or Change of Control” for a discussion of the provisions in Mr. Faneuil's deferred compensation
agreement relating to termination, change of control and related payment obligations.
On September 23, 2009, Alliance and Mr. Faneuil entered into a deferred compensation agreement pursuant to which
Mr. Faneuil will be subject to terms and conditions relating to confidential information, non-solicitation and non-competition, as
provided therein (the “Alliance Deferred Compensation Agreement”). Please read “Potential Payments upon Termination or
Change of Control” for a discussion of the provisions in Mr. Faneuil’s deferred compensation agreement relating to termination,
change of control and related payment obligations.
Potential Payments upon a Change of Control or Termination
The following tables show potential payments to each of our named executive officers under contracts, agreements,
plans or arrangements, whether written or unwritten (including the employment agreements with each of our named executive
officers that were in effect as of December 31, 2019), for various scenarios involving a change of control or termination of
employment of each such named executive officer assuming a December 31, 2019 termination date. In addition, amounts
reflected in the tables below with respect to LTIP awards were calculated based on the closing price of our common units of
$20.16 per unit as of December 31, 2019.
LTIP Awards. Each of our named executive officers holds outstanding unvested phantom units that were granted under
the LTIP. Upon a change of control event, all outstanding phantom units held by our named executive officers that have not
otherwise vested automatically will become fully vested, which is reflected appropriately in the tables below.
LTCIP Awards. Each of our named executive officers was granted a 2019 LTCIP Award and a 2018 LTCIP Award
under the LTCIP. Upon a change of control event, the unvested portion of each of the LTCIP Awards held by our named
executive officers will become fully vested, which is reflected in the tables below.
Long-Term Performance-Based Cash Incentive Plan Awards for Mr. Eric Slifka. Mr. Eric Slifka’s prior employment
agreement with our general partner included a provision for the 2018 Long-Term Performance-Based Cash Incentive Plan
covering the period from March 29, 2018 through March 29. 2019. Upon Mr. Eric Slifka’s termination of employment due to
death, Disability, by our general partner without Cause or by Mr. Eric Slifka for reasons constituting Constructive Termination,
Mr. Eric Slifka is entitled to receive the pro-rated cash incentive amount, if any, earned under the 2018 Long-Term Performance-
Based Cash Incentive Plan, as determined by the Compensation Committee.
Eric Slifka
If Mr. Slifka’s employment is terminated for any reason, he shall be paid (i) all amounts of his base salary due and
owing up through the date of termination, (ii) any earned but unpaid bonus, (iii) all reimbursements of expenses appropriately and
timely submitted, and (iv) any and all other amounts, including vacation pay, that may be due to him as of the date of termination
(the “Eric Slifka Accrued Obligations”).
If Mr. Slifka’s employment is terminated by death or “Disability” (as defined in the employment agreement), he (or his
estate) will be paid (i) the Eric Slifka Accrued Obligations, plus (ii) a lump sum payment equal to his then base salary multiplied
by 200%, plus (iii) an amount equal to the target incentive amount under the then applicable short-term incentive plan multiplied
by 200%, plus (iv) his interests in the long-term incentive plans, including (a) the pro-rated cash incentive amount, if any, earned
under his Long-Term Performance-Based Cash Incentive Plan awards and (b) the amounts of cash and/or securities due as a result
of the automatic vesting of Mr. Slifka’s interests in certain long-term incentive plans, plus (v) group health and similar insurance
premiums on behalf of his spouse and dependents, if any, for 24 months following the date of termination.
If Mr. Slifka’s employment is terminated by our general partner without “Cause” or by Mr. Slifka for reasons
constituting “Constructive Termination,” each as defined in the employment agreement, he shall be paid (i) the Eric
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Slifka Accrued Obligations, plus (ii) a lump sum payment equal to his then base salary multiplied by 200% (provided, however,
that this multiplier shall be 300% if Mr. Slifka terminates his employment for reasons constituting Constructive Termination and
such termination occurs within 12 months following a “Change in Control” (as defined in the employment agreement)), plus
(iii) an amount equal to the target incentive amount under the then applicable short-term incentive plan multiplied by 200%
(provided, however, that this multiplier shall be 300% if Mr. Slifka terminates his employment for reasons constituting
Constructive Termination and such termination occurs within 12 months following a Change in Control), plus (iv) his interests in
the long-term incentive plans, including (a) the pro-rated cash incentive amount, if any, earned under his Long-Term
Performance-Based Cash Incentive Plan awards and (b) the amounts of cash and/or securities due as a result of the automatic
vesting of Mr. Slifka’s interests in certain long-term incentive plans, plus (v) group health and similar insurance premiums on
behalf of his spouse and dependents, if any, for 24 months following the date of termination. If Mr. Slifka terminates his
employment for reasons of Constructive Termination but such termination does not occur within 12 months following a Change
in Control and Mr. Slifka secures employment within 12 months of the date of termination, he shall repay to our general partner
one-half of the cash received from our general partner pursuant to (ii) and (iii) above.
If Mr. Slifka’s employment is terminated by our general partner for Cause, Mr. Slifka will be paid the Eric Slifka
Accrued Obligations. If Mr. Slifka’s employment agreement is not renewed by our general partner and he does not continue to
serve as our general partner’s President and Chief Executive Officer following the expiration of his employment agreement (a
“Non-Renewal”), he shall be paid (i) the Eric Slifka Accrued Obligations, plus (ii) a lump sum payment equal to 200% of his then
base salary, plus the performance-based and discretionary components, if any, of his STIP award for such year.
Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Mr. Slifka automatically shall become fully vested.
Name
Eric Slifka
Severance Amount
2018 Long-Term Performance-Based Cash
Incentive Plan Award (2)
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
4,000,000
4,000,000
4,000,000
6,000,000
2,500,000
—
3,301,805
3,900,000
—
—
7,201,805
2,700,000
3,301,805
3,900,000
50,798
500,000
14,452,603
2,700,000
3,301,805
3,900,000
50,798
—
13,952,603
2,700,000
3,301,805
3,900,000
50,798
—
13,952,603
2,700,000
3,301,805
3,900,000
50,798
—
15,952,603
—
—
—
—
—
2,500,000
(1)
(2)
In the event of non-renewal, for purposes of this calculation, we have assumed that Mr. Slifka would receive payment of (a) 100% of
the performance-based component ($500,000), and (b) 0% of the discretionary component associated with his 2019 STIP target
amount.
In April 2019, the Compensation Committee determined that Mr. Eric Slifka earned $2,700,000 under his 2018 Long-Term
Performance-Based Cash Incentive Award, which amount will be paid in two equal installments in January 2020 and January 2021,
subject to his continued employment on such dates; provided that, such amount is also payable upon certain terminations of
employment as described above.
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Mark A. Romaine
If Mr. Romaine’s employment is terminated for any reason, Mr. Romaine shall be paid (i) all amounts of his base salary
due and owing up through the date of termination, (ii) all earned, but unpaid, bonuses, (iii) all reimbursements of expenses
appropriately and timely submitted, and (iv) any and all other amounts, including vacation pay, that may be due to him as of the
date of termination (the “Romaine Accrued Obligations”).
If Mr. Romaine’s employment is terminated by death or “Disability” (as defined in the employment agreement), he (or
his estate) will be paid (i) the Romaine Accrued Obligations, (ii) a lump sum payment equal to 200% of his then base salary,
(iii) an amount equal to 200% of the target incentive amount under the then applicable short-term incentive plan, (iv) acceleration
of vesting of his cash or equity interests in certain long-term incentive plans, and (v) group health and similar insurance premiums
on behalf of him and his spouse and dependents, if any, for 18 months following the date of termination.
If Mr. Romaine’s employment is terminated by our general partner without “Cause” or by Mr. Romaine for reasons
constituting “Constructive Termination” (each quoted term as defined in the employment agreement), Mr. Romaine shall be paid
(i) the Romaine Accrued Obligations, (ii) a lump sum payment equal to 200% of his then base salary, (iii) an amount equal to
200% of target incentive amount under the then applicable short-term incentive plan, (iv) acceleration of vesting of his cash and
equity interests in long-term incentive plans, (v) group health and similar insurance premiums on behalf of his spouse and
dependents, if any, for 18 months following the date of termination, and (vi) a potential gross-up payment in the event that any of
the payments described above result in taxes being imposed on Mr. Romaine pursuant to Section 4999 of the Code.
Further, if Mr. Romaine’s employment is terminated by our general partner without Cause or Mr. Romaine terminates
his employment for Constructive Termination, at any time within three (3) months before a Change in Control and twelve (12)
months following a Change of Control (as defined in the employment agreement), then, in addition to the foregoing severance
compensation and benefits, Mr. Romaine shall receive 100% accelerated vesting on any and all outstanding Partnership options,
restricted units, phantom units, unit appreciation rights and other similar rights (under the LTIP or otherwise) held by
Mr. Romaine as in effect on the date of termination, such accelerated vesting to occur on the later of (i) the date of termination, or
(ii) the date of the Change of Control.
If Mr. Romaine’s employment agreement is not renewed by our general partner and he does not continue to serve as our
general partner’s Chief Operating Officer following the expiration of his employment agreement pursuant to a different
employment agreement with our general partner, he shall be paid (i) the Romaine Accrued Obligations, plus (ii) a lump sum
payment equal to 200% of his then base salary, plus (iii) the performance-based and discretionary components, if any, of his STIP
award for such year.
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Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Mr. Romaine automatically shall become fully vested.
Name
Mark A. Romaine
Severance Amount
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
1,278,446
1,900,000
—
—
3,178,446
2,300,000
1,278,446
1,900,000
38,713
500,000
6,017,159
2,300,000
1,278,446
1,900,000
38,713
—
5,517,159
2,300,000
1,278,446
1,900,000
38,713
—
5,517,159
2,300,000
1,278,446
1,900,000
38,713
—
5,517,159
1,437,500
—
—
—
—
1,437,500
(1)
In the event of non-renewal, for purposes of this calculation, we have assumed that Mr. Romaine would receive payment of (a) 100%
of the performance-based component ($287,500), and (b) 0% of the discretionary component associated with his 2019 STIP target
amount.
Edward J. Faneuil
If Mr. Faneuil’s employment is terminated for any reason, Mr. Faneuil shall be paid (i) all amounts of his base salary
due and owing up through the date of termination, plus (ii) all earned, but unpaid, bonuses, plus (iii) all reimbursements of
expenses appropriately and timely submitted, plus (iv) any and all other amounts, including vacation pay, that may be due to him
as of the date of termination (the “Faneuil Accrued Obligations”).
If Mr. Faneuil’s employment is terminated by death or “Disability” (as defined in the employment agreement), he (or his
estate) will be paid or receive (i) the Faneuil Accrued Obligations, plus (ii) a lump sum payment equal to 200% of his then base
salary, plus (iii) an amount equal to 200% of the target incentive amount under the then applicable short-term incentive plan, plus
(iv) acceleration of vesting of his cash or equity interests in certain long-term incentive plans, plus (v) group health and similar
insurance premiums on behalf of him and his spouse and dependents for 18 months following the date of termination.
If Mr. Faneuil’s employment is terminated by our general partner without “Cause” or by Mr. Faneuil for reasons
constituting “Constructive Termination,” each as defined in the employment agreement, he shall be paid (i) the Faneuil Accrued
Obligations, (ii) a lump sum payment equal to 200% of his then base salary, (iii) an amount equal to 200% of the target incentive
amount under the then applicable short-term incentive plan, (iv) acceleration of vesting of his cash and equity interests in long-
term incentive plans, (v) group health and similar insurance premiums on behalf of his spouse and dependents, if any, for 18
months following the date of termination, and (vi) a potential gross-up payment in the event that any of the payments described
above result in taxes being imposed on Mr. Faneuil pursuant to Section 4999 of the Code.
If Mr. Faneuil’s employment is terminated by our general partner without Cause or Mr. Faneuil terminates his
employment for Constructive Termination, at any time within three (3) months before a Change in Control and twelve (12)
months following a Change of Control, then, in addition to the foregoing severance compensation and benefits, Mr. Faneuil shall
receive 100% accelerated vesting on any and all outstanding Partnership options, restricted units, phantom units, unit appreciation
rights and other similar rights (under the LTIP or otherwise) held by Mr. Faneuil as in effect on the date of termination, such
accelerated vesting to occur on the later of (i) the date of termination, or (ii) the date of the Change of Control.
If Mr. Faneuil’s employment agreement is not renewed by our general partner and he does not continue to serve as our
general partner’s Executive Vice President and General Counsel following the expiration of his employment agreement pursuant
to a different employment agreement with our general partner, he shall be paid (i) the Faneuil
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Accrued Obligations, plus (ii) a lump sum payment equal to 200% of his then base salary, plus (iii) the performance-based and
discretionary components, if any, of his STIP award for such year.
Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Mr. Faneuil automatically shall become fully vested.
Our general partner and Mr. Faneuil also entered into the Global Deferred Compensation Plan, pursuant to which Mr.
Faneuil is currently being paid the sum of $70,000 per year (the “Global Deferred Compensation”) in equal monthly installments
of $5,833.33 on the first business day of each month for 15 years (180 months). In the event of an unforeseeable emergency as
referenced in the deferred compensation agreement, our general partner will pay Mr. Faneuil within 15 days of the occurrence of
the unforeseeable emergency the maximum amount allowable in a lump sum promptly following the occurrence of such
unforeseeable emergency. The Global Deferred Compensation will be forfeited in its entirety in the event that Mr. Faneuil
terminates his employment for any reason other than death, disability or a Change in Control (as defined below). On and after the
date on which Global Deferred Compensation payments commence, our general partner may terminate its obligations under the
deferred compensation agreement for Cause or if our general partner subsequently determines within 18 months of Mr. Faneuil’s
termination that circumstances which would give rise to a for Cause termination of Mr. Faneuil otherwise existed at the time of
his earlier termination. In the event of Mr. Faneuil’s death prior to his receiving any or all of the aggregate amount of the Global
Deferred Compensation, our general partner will pay Mr. Faneuil’s beneficiary within 60 days of the date of his death a single
lump sum payment in an amount equal to the present value of the remaining payments that would have been paid to Mr. Faneuil.
If there is a Change in Control or Mr. Faneuil is determined to have become disabled prior to his receiving any or all of the
aggregate amount of the Global Deferred Compensation, our general partner will pay to Mr. Faneuil within 60 days of the
effective date of the Change in Control or the determination that Mr. Faneuil became disabled a single lump sum payment in an
amount equal to the present value of the remaining payments that would have been paid to him had the Change in Control not
occurred or had Mr. Faneuil not become disabled. For purposes of the Global Deferred Compensation Agreement, “Cause”, as
defined in the deferred compensation agreement, means (a) any uncured material breach by Mr. Faneuil of his obligations under
the Global Deferred Compensation Agreement, (b) any breach by Mr. Faneuil of his confidentiality, non-competition and non-
solicitation obligations set forth on Exhibit “A” to the Global Deferred Compensation Agreement or included in his employment
agreement with our general partner, (c) engagement in gross negligence or willful misconduct in the performance of his duties,
(d) a conviction or plea of no contest to a crime involving fraud, dishonesty or moral turpitude or any felony, or (e) the
commission of an act of embezzlement or willful breach of a fiduciary duty to our general partner, the Partnership or any of its
Affiliates.
Alliance and Mr. Faneuil also entered into the Alliance Deferred Compensation Agreement, the terms of which,
including, without limitation, the payment terms thereunder, are on the same terms as those of the Global Deferred Compensation
Agreement. Accordingly, the various scenarios involving a change of control or termination of employment under the Alliance
Deferred Compensation Agreement are identical to those described above with respect to the Global Deferred Compensation
Agreement.
Our general partner is obligated to reimburse Mr. Faneuil for any and all federal excise taxes and penalties (other than
penalties imposed as a result of Mr. Faneuil’s actions), and any taxes imposed upon such reimbursement amounts, including, but
not limited to, any federal, state and local income taxes, employment taxes, and other taxes, if any, which may become due
pursuant to the application of Sections 4999 and/or 409A of the Code on any payments to Mr. Faneuil in connection the
employment agreement. Mr. Faneuil and our general partner have agreed to reform any provision of the deferred compensation
agreement, as amended, between them in a manner mutually agreeable to avoid imposition of any additional tax under the
provisions of Section 409A of the Code and related regulations and Treasury pronouncements.
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Name
Edward J. Faneuil
Severance Amount
Deferred Compensation
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
1,226,272
1,023,060
1,600,000
—
—
3,849,332
2,000,000
1,226,272
1,023,060
1,600,000
25,074
335,000
6,209,406
2,000,000
1,226,272
1,023,060
1,600,000
25,074
—
5,874,406
2,000,000
1,226,272
1,023,060
1,600,000
25,074
—
5,874,406
2,000,000
1,226,272
1,023,060
1,600,000
25,074
—
5,874,406
1,250,000
—
—
—
—
—
1,250,000
(1)
In the event of non-renewal, for purposes of this calculation, we have assumed that Mr. Faneuil would receive payment of (a) 100% of
the performance-based component ($250,000), and (b) 0% of the discretionary component, associated with his 2019 STIP target
amount.
Daphne H. Foster
If Ms. Foster’s employment is terminated for any reason, Ms. Foster shall be paid (i) all amounts of her base salary due
and owing up through the date of termination, (ii) all earned, but unpaid, bonuses, (iii) all reimbursements of expenses
appropriately and timely submitted, and (iv) any and all other amounts, including vacation pay, that may be due to her as of the
date of termination (the “Foster Accrued Obligations”).
If Ms. Foster’s employment is terminated by death or “Disability” (as defined in the employment agreement), she (or her
estate) will be paid or receive (i) the Foster Accrued Obligations, plus (ii) a lump sum payment equal to 200% of her then base
salary, plus (iii) an amount equal to 200% of the target incentive amount under the then applicable short-term incentive plan, plus
(iv) acceleration of vesting of her cash or equity interests in long-term incentive plans, plus (v) group health and similar insurance
premiums on behalf of her and her spouse and dependents, if any, for 18 months following the date of termination.
If Ms. Foster’s employment is terminated by our general partner without “Cause” or by Ms. Foster for reasons
constituting “Constructive Termination” (each quoted term as defined in the employment agreement), Ms. Foster shall be paid (i)
the Foster Accrued Obligations, plus (ii) a lump sum payment equal to 200% of her then base salary, plus (iii) an amount equal to
200% of target incentive amount under the then applicable short-term incentive plan, plus (iv) acceleration of vesting of her cash
and equity interests in long-term incentive plans, (v) group health and similar insurance premiums on behalf of her spouse and
dependents, if any, for 18 months following the date of termination, plus (vi) a potential gross-up payment in the event that any of
the payments described above result in taxes being imposed on Ms. Foster pursuant to Section 4999 of the Code.
Further, if Ms. Foster’s employment is terminated by our general partner without Cause or Ms. Foster terminates her
employment for Constructive Termination, at any time within three (3) months before a Change in Control and twelve (12)
months following a Change of Control, then, in addition to the foregoing severance compensation and benefits, Ms. Foster shall
receive 100% accelerated vesting on any and all outstanding Partnership options, restricted units, phantom units, unit appreciation
rights and other similar rights (under the LTIP or otherwise) held by Ms. Foster as in effect on the date of termination, such
accelerated vesting to occur on the later of (i) the date of termination, or (ii) the date of the Change of Control.
If Ms. Foster’s employment agreement is not renewed by our general partner and she does not continue to serve as our
general partner’s Chief Financial Officer following the expiration of her employment agreement pursuant to a different
employment agreement with our general partner, she shall be paid (i) the Foster Accrued Obligations, (ii) a lump sum payment
equal to 200% of her then base salary, and (iii) the performance-based and discretionary components, if any, of her STIP award
for such year.
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Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Ms. Foster automatically shall become fully vested.
Name
Daphne H. Foster
Severance Amount
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
1,085,717
1,600,000
—
—
2,685,717
2,000,000
1,085,717
1,600,000
2,296
500,000
5,188,013
2,000,000
1,085,717
1,600,000
2,296
—
4,688,013
2,000,000
1,085,717
1,600,000
2,296
—
4,688,013
2,000,000
1,085,717
1,600,000
2,296
—
4,688,013
1,200,000
—
—
—
—
1,200,000
(1)
In the event of non-renewal, for purposes of this calculation, we have assumed that Ms. Foster would receive payment of (a) 100% of
the performance-based component ($250,000), and (b) 0% of the discretionary component associated with her 2019 STIP target
amount.
Andrew Slifka
If Mr. Slifka’s employment is terminated for any reason, he shall be paid (i) all amounts of his base salary due and
owing up through the date of termination, (ii) any earned but unpaid bonus, (iii) all reimbursements of expenses appropriately and
timely submitted and (iv) any and all other amounts, including vacation pay, that may be due to him as of the date of termination
(the “Andrew Slifka Accrued Obligations”).
If Mr. Slifka’s employment is terminated due to death or “Disability” (as defined in the employment agreement), he (or
his estate) shall be paid (i) the Andrew Slifka Accrued Obligations, (ii) a lump sum payment equal to 200% of his then base
salary, plus (iii) an amount equal to 200% of the target incentive amount under the then applicable short-term incentive plan, plus
(iv) acceleration of vesting of his cash or equity interests in long-term incentive plans, plus (v) group health and similar insurance
premiums on behalf of him and his spouse and dependents, if any, for 24 months following the date of termination.
If Mr. Slifka’s employment is terminated by our general partner without “Cause” or by Mr. Slifka for reasons
constituting “Constructive Termination,” each as defined in the employment agreement, he shall be paid (i) the Andrew Slifka
Accrued Obligations, plus (ii) a lump sum payment equal to 200% of his then base salary, plus (iii) an amount equal to 200% of
target incentive amount under the then applicable short-term incentive plan, plus (iv) acceleration of vesting of his cash and
equity interests in long-term incentive plans, plus (v) group health and similar insurance premiums on behalf of his spouse and
dependents, if any, for 24 months following the date of termination, plus (vi) a potential gross-up payment in the event that any of
the payments described above result in taxes being imposed on Mr. Slifka pursuant to Section 4999 of the Code.
If Mr. Slifka’s employment is terminated by our general partner for Cause, he shall be paid the Andrew Slifka Accrued
Obligations.
If Mr. Slifka’s employment agreement is not renewed by our general partner and he does not continue to serve as our
general partner’s Executive Vice President or President of the GDSO Division of the Partnership following the expiration of his
employment agreement pursuant to a different employment agreement with our general partner, he shall be paid (i) the Andrew
Slifka Accrued Obligations, (ii) a lump sum payment equal to 200% of his then base salary, and (iii) the performance-based and
discretionary components, if any, of his STIP award for such year.
Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Mr. Slifka automatically shall become fully vested.
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Name
Andrew Slifka
Severance Amount
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
692,073
900,000
—
—
1,592,073
1,620,000
692,073
900,000
51,632
500,000
3,763,705
1,620,000
692,073
900,000
51,632
—
3,263,705
1,620,000
692,073
900,000
51,632
—
3,263,705
1,620,000
692,073
900,000
51,632
—
3,263,705
1,117,500
—
—
—
—
1,117,500
(1)
In the event of non-renewal, for purposes of this calculation, we have assumed that Mr. Slifka would receive payment of (a) 100% of
the performance-based component ($167,500), and (b) 0% of the discretionary component associated with his 2019 STIP target
amount.
Matthew Spencer
If Mr. Spencer’s employment is terminated for any reason, he (or his estate, as applicable) shall be paid (i) all amounts of
base salary due and owing up through the date of termination, (ii) any earned but unpaid bonus, (iii) all reimbursements of
eligible business expenses, and (iv) any and all other amounts, including vacation pay, that may be due to him as of the date of
termination (collectively, the “Spencer Accrued Obligations”).
If Mr. Spencer’s employment is terminated due to his death or disability, he (or his estate, as applicable) will be paid (i) the
Spencer Accrued Obligations, plus (ii) a lump sum payment equal to 200% of his base salary, plus (iii) an amount equal to 200%
of the target incentive amount under the then applicable short-term incentive plan, plus (iv) acceleration of vesting of his cash and
equity interests in certain long-term incentive plans, plus (v) group health and similar insurance premiums on behalf of him and
his spouse and dependents, if any, for 18 months following the date of termination.
If Mr. Spencer’s employment is terminated by our general partner without “Cause” or by Mr. Spencer for reasons
constituting “Constructive Termination” (each as defined in the employment agreement), he shall be paid (i) the Spencer Accrued
Obligations, plus (ii) a lump sum payment equal to 200% of his base salary, plus (iii) an amount equal to 200% of the target
incentive amount under the then applicable short-term incentive plan, plus (iv) acceleration of vesting of his cash and equity
interests in certain long-term incentive plans, plus (v) group health and similar insurance premiums on behalf of him and his
spouse and dependents, if any, for 18 months following the date of termination, plus (vi) a potential gross-up payment in the event
that any of the payments described above result in taxes being imposed on Mr. Spencer pursuant to Section 4999 of the Code.
If Mr. Spencer’s employment agreement is not renewed by our general partner and he does not continue to serve as our
general partner’s Chief Accounting Officer following the expiration of his employment agreement pursuant to a different
employment agreement with our general partner, the employment agreement provides that he shall be paid (i) the Spencer
Accrued Obligations, (ii) a lump sum payment equal to 200% of his then base salary, and (iii) the performance-based and
discretionary components, if any, of his STIP award for such year.
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Upon a Change of Control, the unvested portions of any outstanding LTCIP Awards and outstanding phantom units held
by Mr. Spencer automatically shall become fully vested.
Name
Matthew Spencer
Severance Amount
LTIP awards
LTCIP award
Fringe benefits
Life insurance benefits
Total
Termination by general
partner without Cause /
Constructive Termination /
Breach by general partner
No Change With a Change
Death
($)
Disability
($)
in Control
($)
in Control
($)
Nonrenewal
($)(1)
Change in
Control
($)
—
311,331
550,000
—
—
861,331
950,000
311,331
550,000
38,713
500,000
2,350,044
950,000
311,331
550,000
38,713
—
1,850,044
950,000
311,331
550,000
38,713
—
1,850,044
950,000
311,331
550,000
38,713
—
1,850,044
650,000
—
—
—
—
650,000
(1)
In the event of non-renewal, for purposes of this calculation, we have assumed that Mr. Spencer would receive payment of (a) 100%
of the performance-based component ($100,000), and (b) 0% of the discretionary component associated with his 2019 STIP target
amount.
Other Benefits
Pension Benefits
The table below sets forth information regarding the present value as of December 31, 2019 of the accumulated benefits
of our named executive officers under the Global Partners LP Pension Plan, and, with respect to Mr. Faneuil, the Global and
Alliance Deferred Compensation Agreements. Amounts with respect to the Global and Alliance Deferred Compensation
Agreements are reflected in the table below because they represent a fixed entitlement.
Pension Benefits at December 31, 2019
Present Value of
Number of Years
Payments During
Plan Name Credited Service (#) Accumulated Benefit ($) Last Fiscal Year ($)
—
—
—
70,000
70,000
—
—
—
—
708,838
260,393
886,385
613,136
613,136
46,213
34,468
293,895
—
23
11
19
n/a
n/a
3
7
12
—
(1)
(1)
(1)
(2)
(3)
(1)
(1)
(4)
—
Name
Eric Slifka
Mark A. Romaine
Edward J. Faneuil
Edward J. Faneuil
Edward J. Faneuil
Daphne H. Foster
Andrew P. Slifka
Andrew P. Slifka
Matthew Spencer
(1) Global Partners LP Pension Plan
(2) Global Deferred Compensation Agreement
(3) Alliance Deferred Compensation Agreement
(4) Global Montello Group Corp. Pension Plan
Global Partners LP Pension Plan
Effective December 31, 2009, the Global Partners LP Pension Plan (the “Global Pension Plan”) was amended to freeze
participation in and benefit accruals under the Global Pension Plan. Prior to the freeze, all employees who (1) were 21 years of
age or older, (2) were not covered by a collective bargaining agreement providing for union pension benefits, and (3) had been
employed by our predecessor, our general partner or one of our operating subsidiaries for one
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year prior to enrollment in the Global Pension Plan were eligible to participate in the Global Pension Plan. An employee is fully
vested in benefits under the Global Pension Plan after completing five years of service or upon termination due to death or
disability. Certain employees are entitled to a supplemental benefit that vested over five years with 20% vesting on each
December 31 beginning in 2010 and lasting through 2014. When an employee retires at age 65 or, if later, upon reaching five
years' service, the employee can elect to receive a monthly annuity or an equivalent lump sum payment. An employee's benefit
payable at retirement is equal to (1) 23% of the employee's average monthly compensation for the five consecutive calendar years
during which the employee received the highest amount of pay (“Average Compensation”) plus (2) 19.5% of the employee’s
Average Compensation in excess of his monthly “covered compensation” for Social Security purposes, as provided in the Global
Pension Plan. However, if an employee has completed less than 30 years of service on his termination at or after reaching age 65,
the monthly benefit will be reduced by 1/30th for each year less than 30 years completed by the employee. When an employee
retires at an age other than 65, the employee retirement benefit will be the actuarial equivalent of the benefit he or she would have
received if he or she had retired at age 65. An employee who terminates employment after completing at least five years of
service will be eligible for an early retirement benefit determined as described in the preceding sentence at any time after attaining
age 60.
Benefits under the formula are based upon the employee’s highest consecutive five-year average compensation and are
not subject to offset for social security benefits. Compensation for such purposes means compensation including overtime, but
excluding bonuses, 50% of commissions, taxable fringe benefits, relocation allowances, transportation allowances, housing
allowances, cash and DERs pursuant to any long-term incentive plan and any cash payable in lieu of group healthcare coverage.
GMG Pension Plan
As a result of the Alliance Acquisition, effective as of March 1, 2012, sponsorship of Alliance Energy LLC Pension Plan
was transferred to GMG, which is a part of our controlled group, and the name of the plan was changed to the Global Montello
Group Corp. Pension Plan (the “GMG Pension Plan”). Effective May 15, 2012, the GMG Pension Plan was amended to freeze
participation in and benefit accruals. Prior to the freeze, all employees who (1) were 21 years of age or older, (2) were not covered
by a collective bargaining agreement providing for union pension benefits, (3) had been employed by GMG or a predecessor
employer for one year prior to enrollment in the Pension Plan, (4) were not nonresident aliens, (5) had not become employees as a
result of Code Section 410(b)(6)(C) transaction during the current or next preceding year and (6) were not non-exempt gas
station/c-store employees hired on or after January 1, 2007 or employees hired after September 30, 2009 were eligible to
participate in the GMG Pension Plan. An employee is fully vested in benefits under the GMG Pension Plan after completing five
years of service or, if earlier, upon termination due to death or disability. When an employee retires at age 65 with 5 years of
service, the employee can elect to receive a monthly annuity or an equivalent lump sum payment. The employee's benefit payable
at retirement is equal to (1) 23% of the employee’s average monthly compensation for the five consecutive calendar years during
which the employee received the highest amount of pay (“Average Compensation”) plus (2) 19.5% of the employee's Average
Compensation in excess of his monthly “covered compensation” for Social Security purposes, as provided in the GMG Pension
Plan. When an employee retires at an age other than 65, the employee retirement benefit will be the actuarial equivalent of the
benefit he or she would have received if he or she had retired at age 65. An employee who terminates employment after
completing at least five years of service will be eligible for an early retirement benefit determined as described in the preceding
sentence at any time after attaining age 60.
Benefits under the GMG Pension Plan formula are based upon the employee’s highest consecutive five-year average
compensation and are not subject to offset for social security benefits. Compensation for such purposes means compensation
including overtime, but excluding bonuses, 50% of commissions, deferred compensation, employee benefits, moving expenses,
transportation allowance, salary continuation and non-cash remuneration.
Supplemental Executive Retirement Agreement
On December 31, 2009, our general partner entered into a SERP agreement with Edward J. Faneuil. Mr. Faneuil's SERP
benefit became fully vested on December 31, 2014. The value of the SERP benefit to be provided under the agreement, expressed
as a single lump sum payment, is $159,355 for Mr. Faneuil.
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Global and Alliance Deferred Compensation Agreements
For a description of the deferred compensation arrangements provided to Mr. Faneuil pursuant to the Global Deferred
Compensation Plan and the Alliance Deferred Compensation Plan, please read “Employment and Related Agreements—Deferred
Compensation Agreements” and “Potential Payments upon a Change of Control or Termination.”
Compensation of Directors
The following table sets forth (i) certain information concerning the compensation earned by our directors in 2019, and
(ii) the aggregate amounts of stock awards and option awards, if any, held by each director at the end of the last fiscal year:
Name
Richard Slifka (1)
Eric Slifka (2)
Andrew Slifka (2)
Kenneth I. Watchmaker (1)
Robert J. McCool (1)
David McKown (1)
John T. Hailer (1)
Daphne H. Foster (2)
Fees Earned
or Paid in
Cash ($)
Total ($)
75,500
—
—
102,500
87,500
87,500
87,500
—
75,500
—
—
102,500
87,500
87,500
87,500
—
(1) As of December 31, 2019, our non-employee directors held the following aggregate number of unvested phantom units: Mr. Richard
Slifka (0), Mr. Watchmaker (5,971), Mr. McCool (5,374), Mr. McKown (4,777) and Mr. Hailer (0).
(2) Messrs. Eric Slifka and Andrew Slifka and Ms. Foster, as executive officers of our general partner, are otherwise compensated for their
services and therefore receive no separate compensation for their service as directors.
Employees of our general partner who also serve as directors do not receive additional compensation. In 2019, directors
who are not employees of our general partner (1) received: (a) a $67,500 annual cash retainer; (b) $1,000 for each meeting of the
board of directors attended; (c) $2,000 for each audit committee meeting attended (limited to payment for one committee meeting
per day); and (d) $1,000 for each committee meeting other than the audit committee meeting attended (limited to payment for one
committee meeting per day), and (2) are eligible to participate in the LTIP and the LTCIP.
Each director also is reimbursed for out-of-pocket expenses in connection with attending meetings of the board of
directors or committees.
On August 7, 2019, Mr. Watchmaker, Mr. McCool, Mr. McKown and Mr. Hailer, respectively, were awarded LTCIP
grants in the amounts of $230,000, $160,000, $125,000 and $80,000 in respect of services rendered in 2018. Each such LTCIP
award will fully vest as of August 10, 2022, subject to continued service as a director through such date.
On March 6, 2019, Mr. Watchmaker, Mr. McCool and Mr. McKown, respectively, were awarded LTCIP grants in the
amounts of $140,000, $125,000, and $115,000 in respect of services rendered in 2017. Each such LTCIP award will fully vest as
of March 1, 2022, subject to continued service as a director through such date.
On August 16, 2017, Mr. Watchmaker was granted an award of 5,971 phantom units, Mr. McCool was granted an award
of 5,374 phantom units and Mr. McKown was granted an award of 4,777 phantom units. Each of these awards cliff vest as to
100% of the phantom units on August 1, 2020. The awards granted to Messrs. Watchmaker and McCool will be settled in
common units while the award granted to Mr. McKown will be settled in cash.
Each director will be fully indemnified by us for actions associated with being a director to the extent permitted under
Delaware law.
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Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u)
of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our
employees and the annual total compensation of Mr. Eric Slifka, our CEO.
For 2019, our last completed fiscal year:
·
·
The median of the annual total compensation of our employees (other than the CEO) was $26,501; and
The annual total compensation of our CEO, as reported in the Summary Compensation Table above, was
$1,863,608.
· Based on this information, for 2019, the ratio of the annual total compensation of our CEO to the median of the
annual total compensation of all employees was reasonably estimated to be 70 to 1.
To put this into context, approximately 79% of our employee population consists of convenience store employees,
approximately 43% of whom are employed on a part-time basis. Our part-time employees who work less than thirty hours per
week receive (i) wages, and (ii) if eligible, sick time and/or 401(k) benefits, but are not eligible for vacation or other fringe
benefits. In comparison, if we were to only look at our non-convenience store employee population, the median employee
would be employed on a full-time basis, with a total annual compensation of $78,873 in 2019. The ratio of the annual total
compensation of our CEO to this median employee was reasonably estimated to be 24 to 1.
To identity the median of the annual total compensation of all of our employees, as well as to determine the annual
total compensation of our median employee and our CEO, we took the following steps:
· We determined that, as of December 31, 2019, our employee population consisted of approximately 3,887
individuals with all of these individuals located in the United States. This population consisted of our full-time,
part-time, and temporary (including seasonal) employees. We selected December 31, 2019 as identification date
for determining our median employee because it enabled us to make such identification in a reasonably efficient
and economic manner.
· We used a consistently applied compensation measure to identify our median employee by comparing the amount
of salary or wages, bonuses and equity awards, if any, reflected in our payroll records as reported to the Internal
Revenue Service on Form W-2 for 2019.
· We identified our median employee by consistently applying this compensation measure to all of our employees
included in our analysis. Since all of our employees, including our CEO, are located in the United States, we did
not make any cost of living adjustments in identifying the median employee.
· After we identified our median employee, we combined all of the elements of such employee’s compensation for
the 2019 year in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual
total compensation of $26,501.
· With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of
the Summary Compensation Table above.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth as of March 4, 2020 the beneficial ownership of units representing limited partner interests
in Global Partners LP (“Units”) held by certain beneficial owners of more than five percent (5%) of the Units, by each director
and named executive officer of Global GP LLC, the general partner of Global Partners LP (“General Partner”) and by all directors
and executive officers of our General Partner as a group:
Name of Beneficial Owner (1)
Invesco Ltd. (2)
Richard Slifka (3)(5)(6)(7)(8)
Alfred A. Slifka 1990 Trust Under Article II-A (3)(5)(7)
Montello Oil Corporation (3)
Kayne Anderson Capital Advisors L.P. (4)
Richard A. Kayne (4)
Global Petroleum Corp. (5)
Eric Slifka (7)(9)(10)
Andrew Slifka
Global GP LLC (7)
Edward J. Faneuil
Mark Romaine
Daphne H. Foster
Matthew Spencer
Kenneth I. Watchmaker
Robert J. McCool
David K. McKown
John T. Hailer
All directors and executive officers as a group (11 persons)
* Less than 1%
Common
Units
Beneficially
Percentage
of Common
Units
Beneficially
Owned
Owned
5,950,461
5,160,883
4,315,395
2,348,078
2,333,459
2,333,459
1,725,463
1,492,919
516,334
127,329
96,705
53,102
17,414
4,827
32,885
31,235
7,857
—
7,286,832
17.5 %
15.2 %
12.7 %
6.9 %
6.9 %
6.9 %
5.1 %
4.4 %
1.5 %
*
*
*
*
*
*
*
*
*
21.4 %
(1) The address for each person or entity listed other than (i) Kayne Anderson Capital Advisors, L.P., (ii) Richard A. Kayne, and
(iii) Invesco Ltd. is P.O. Box 9161, 800 South Street, Suite 500, Waltham, Massachusetts 02454‑9161.
(2) According to a Schedule 13G/A filed on February 12, 2020, Invesco Ltd., in its capacity as a parent holding company to its investment
advisers, has sole voting and dispositive power over 5,950,461 common units that it may be deemed to beneficially own and which are
held of record by clients of Invesco Ltd. Invesco Advisers, Inc. is a subsidiary of Invesco Ltd. and it advises (i) the Invesco
Oppenheimer SteelPath MLP Select 40 Fund, which owns 8.95% of the common units outstanding, and (ii) the Invesco Oppenheimer
SteelPath MLP Income Fund, which owns 8.48% of the common units outstanding. However, no one individual has greater than 5%
economic ownership. The shareholders of the Fund have the right to receive or the power to direct the receipt of dividends and
proceeds from the sale of such securities. The address for Invesco Ltd. is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309.
(3) Richard Slifka and the Alfred A. Slifka 1990 Trust Under Article II-A share voting and investment power with respect to and,
therefore, may be deemed to beneficially own, the common units owned by Montello Oil Corporation.
(4) According to a Schedule 13G/A filed on February 6, 2020, Kayne Anderson Capital Advisors, L.P. and Richard A. Kayne have shared
voting and dispositive power with regard to 2,333,459 common units. The units are owned by investment accounts (investment limited
partnerships, registered investment companies and institutional accounts) managed, with discretion to purchase or sell securities, by
Kayne Anderson Capital Advisors, L.P. (or a controlled affiliate thereof), as a registered investment adviser. Kayne Anderson Capital
Advisors, L.P. is the general partner (or general partner of the general partner) of the limited partnerships and investment adviser to the
other accounts. Richard A. Kayne is the controlling shareholder of the corporate owner of Kayne Anderson Investment Management,
Inc., the general partner of Kayne Anderson Capital Advisors, L.P. Mr. Kayne is also a limited partner of certain of the limited
partnerships and shareholder of certain of the registered investment companies. The address for Kayne Anderson Capital Advisors, L.P.
and Richard A. Kayne is 1800 Avenue of the Stars, Third Floor, Los Angeles, California 90067.
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(5) Richard Slifka and the Alfred A. Slifka 1990 Trust Under Article II-A share voting and investment power with respect to and,
therefore, may be deemed to beneficially own, the common units owned by Global Petroleum Corp.
(6) Richard Slifka has sole voting and investment power with respect to and, therefore, may be deemed to beneficially own, the common
units owned by Chelsea Terminal Limited Partnership.
(7) Purchased by our general partner for the purpose of assisting us in meeting our anticipated obligations to deliver common units under
our Long-Term Incentive Plan to officers, directors and employees. Richard Slifka and the Alfred A. Slifka 1990 Trust Under Article
II-A control Global GP LLC, and thus may be deemed to beneficially own the common units owned by Global GP LLC. The co-
trustees of the Alfred A. Slifka 1990 Trust Under Article II-A have delegated the voting rights in Global GP LLC of the Alfred A.
Slifka 1990 Trust Under Article II-A to Eric Slifka, and thus Eric Slifka may be deemed to beneficially own the common units owned
by Global GP LLC.
(8) Richard Slifka is the trustee of a voting trust with sole voting and investment power with respect to common units owned by Larea
Holdings II LLC. Richard Slifka may, therefore, be deemed to beneficially own, the common units held by Larea Holdings II LLC.
(9) Eric Slifka has sole voting and investment power with respect to common units owned by Larea Holdings LLC. Eric Slifka may,
therefore, be deemed to beneficially own, the common units held by Larea Holdings LLC.
(10) Beneficially owned common unit amounts for Eric Slifka include common units held in certain family trusts for the benefit of Eric
Slifka’s children, for which Eric Slifka is the sole trustee.
Equity Compensation Plan Table
The following table summarizes information about our equity compensation plans as of December 31, 2019:
Number of securities
Number of Securities
Weighted average
to be issued
exercise price of
upon exercise of
outstanding options,
outstanding options,
warrants and rights warrants and rights
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
(a)
(b)
562,906
—
562,906
—
—
—
Item 13. Certain Relationships and Related Transactions, and Director Independence.
3,016,234
—
3,016,234
As of March 4, 2020, affiliates of our general partner, including current directors and executive officers of our general
partner, owned 7,286,832 common units representing 21.4% of the common units. In addition, our general partner owns a 0.67%
general partner interest in us.
Alfred A. Slifka, former Chairman of the board of our general partner, passed away on March 9, 2014. Mr. Slifka’s
estate closed effective February 28, 2017 and his interests in our general partner and his beneficially owned interests in Global
Partners LP and its affiliates were transferred to the Alfred A. Slifka 1990 Trust Under Article II-A on that date.
Steven McCool, the son of Robert J. McCool, one of our independent directors, is an employee of Global GP LLC.
During our fiscal year ended December 31, 2019, his total compensation earned was approximately $163,000.
Maxwell Foster, the son of Daphne H. Foster, our Chief Financial Officer, is an employee of Global GP LLC. During
our fiscal year ended December 31, 2019, his total compensation earned was approximately $575,000.
James Cook, the son-in-law of Richard Slifka, our Chairman, and the brother-in-law of Andrew Slifka, our Executive
Vice President and director, is an employee of Global GP LLC. During our fiscal year ended December 31, 2019, his total
compensation earned was approximately $267,000.
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Operational Stage
Distributions of available cash to our general partner and its
affiliates
Payments to our general partner and its affiliates
Withdrawal or removal of our general partner
Liquidation Stage
Liquidation
Noncompetition
We will generally make cash distributions of 99.33% to the
common unitholders, including affiliates of our general partner
(including directors and executive officers of our general
partner), as the holders of an aggregate of 7,286,832 common
units and 0.67% to our general partner. In addition, if
distributions exceed the minimum quarterly distribution and
other higher target levels, our general partner will be entitled
to increasing percentages of the distributions, up to 48.67% of
the distributions above the highest target level.
Assuming we have sufficient available cash to pay the full
minimum quarterly distribution on all of our outstanding
common units for four quarters, our general partner and its
affiliates, including directors and executive officers of our
general partner, would receive an annual distribution of
approximately $13.5 million on their common units and
$0.4 million on the 0.67% general partner interest.
Our general partner does not receive a management fee or
other compensation for its management of Global Partners LP.
Our general partner and its affiliates are reimbursed for
expenses incurred on our behalf. Our partnership agreement
provides that our general partner determines the amount of
these expenses.
If our general partner withdraws or is removed, its general
partner interest and its incentive distribution rights will either
be sold to the new general partner for cash or converted into
common units, in each case for an amount equal to the fair
market value of those interests.
Upon our liquidation, the partners, including our general
partner, will be entitled to receive liquidating distributions
according to their particular capital account balances.
We are a party to an omnibus agreement with Mr. Richard Slifka and our general partner that addresses the agreement of
Mr. Richard Slifka not to compete with us and to cause his affiliates not to compete with us under certain circumstances. The
omnibus agreement also addressed certain environmental indemnity obligations of Global Petroleum Corp. and certain of its
affiliates, which indemnity obligations have expired. In connection with our acquisition of Alliance, Richard Slifka, Chairman of
our general partner, entered into a business opportunity agreement with our general partner containing noncompetition provisions
which are broader than those contained in the omnibus agreement in order to encompass our expanded lines of business since
2005.
Pursuant to the omnibus agreement and the business opportunity agreement, Richard Slifka agreed, for himself and his
respective affiliates, not to engage in, acquire or invest in any of the following businesses: (1) the wholesale and/or retail
marketing, sale, distribution and transportation (other than transportation by truck) of refined petroleum products, crude oil,
ethanol, propane and biofuels; (2) the storage of refined petroleum products and/or any of the other products identified in (1) or
asphalt in connection with any of the activities described in (1); (3) bunkering; and (4) such other activities in which the
Partnership, and its direct or indirect subsidiaries, or any of their businesses are engaged or,
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to the knowledge of Richard Slifka, are planning to become engaged. These noncompetition obligations survive under the
omnibus agreement for so long as Richard Slifka, Eric Slifka and/or any of their respective affiliates, individually or as part of a
group, control our general partner, and under the business opportunity agreement indefinitely.
Pursuant to Eric Slifka’s and Andrew Slifka’s respective employment agreements with our general partner, each of Eric
Slifka and Andrew Slifka agreed, for themselves and their respective affiliates, to not work (as an employee, consultant, advisor,
director or otherwise), engage in, acquire or invest in any of the following businesses: (1) the wholesale or retail marketing, sale,
distribution and transportation of refined petroleum products, crude oil, renewable fuels (including ethanol and biofuels), and
natural gas liquids (including ethane, butane, propane and condensates); (2) the storage of refined petroleum products and/or any
of the other products identified in clause (1) above in connection with any of the activities described in said clause (1); (3) the
retail sale of convenience store items and sundries and related food service, whether or not related to the retail sale of refined
petroleum products including, without limitation, gasoline; (4) bunkering; and (5) any other business in which the general partner
or its affiliates (a) becomes engaged during the period that they are employed by the general partner or any of its affiliates, or
(b) is preparing to become engaged as of the time that their employment with the general partner or any of its affiliates ends and,
with respect to parts (a) and (b) of this clause (5), they have participated in or obtained Confidential Information about such
business or anticipated business. Each of Eric Slifka and Andrew Slifka further agreed to not directly or indirectly solicit any
employees, contractors, vendors, suppliers or customers of the general partner or any of its affiliates to cease to be employed by
or otherwise do business with the general partner or any of its affiliates, or to reduce the same. The foregoing noncompetition and
nonsolicitation restrictions may be waived only by the conflicts committee of the general partner’s board of directors. Eric
Slifka’s and Andrew Slifka’s noncompetition and non-solicitation obligations survive for one year following the termination of
their respective employment for any reason other than death or the termination of their employment by the general partner
without Cause (as defined in their respective employment agreements). In consideration for their respective noncompetition
obligations, the general partner shall pay to each of Eric Slifka and Andrew Slifka a total payment equal to fifty percent (50%) of
their highest annualized Base Salary (as defined in their respective employment agreements) within the two years preceding
termination; provided, that the general partner shall have no obligation to make such payments in the event that Eric Slifka or
Andrew Slifka breaches any of the terms of their noncompetition obligations.
In addition, Eric Slifka’s and Andrew Slifka’s employment agreements include, and Eric Slifka and Andrew Slifka both
agreed to, a confidentiality provision, which generally will continue for two years following Eric Slifka’s and Andrew Slifka’s
termination of employment.
Shared Services Agreement
We are party to a shared services agreement with Global Petroleum Corp. We believe the terms of this agreement are at
least as favorable as could have been obtained from unaffiliated third parties. Under this agreement, we provide Global Petroleum
Corp. with certain accounting, treasury, legal, information technology, human resources and financial operations support for
which Global Petroleum Corp. pays or paid us an amount based upon the cost associated with the provision of such services. We
will continue to provide Global Petroleum Corp. with such services for an indefinite term, and Global Petroleum Corp. may
terminate its receipt of some or all of the services thereunder upon 90 days’ prior written notice. As of December 31, 2019, no
notice of termination had been given under the agreement with Global Petroleum Corp. as then in effect.
Revere Terminal Acquisition from Global Petroleum Corp.
On January 14, 2015, we acquired the Revere terminal from Global Petroleum Corp. for a purchase price of
approximately $23.7 million. Global Petroleum Corp. is currently owned by the Alfred A. Slifka 1990 Trust Under Article II-A
and Richard Slifka. Pursuant to the purchase agreement entered into by both parties, we assumed all liabilities and obligations of
Global Petroleum Corp. related to the terminal and the underlying real property, except for certain liabilities as set forth in the
purchase agreement. We released Global Petroleum Corp. from and agreed to indemnify Global Petroleum Corp. from all known
and unknown environmental liabilities relating to the terminal and underlying real property, provided that we will be responsible
for the first remediation expenses arising from unknown conditions up to $1.5 million, in the aggregate, and then Global
Petroleum Corp. will reimburse us for any remediation
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expenses in excess of $1.5 million up to $2.3 million, provided further that (i) Global Petroleum Corp. will have no obligation to
reimburse us for expenses in excess of $750,000 in the aggregate, and (ii) Global Petroleum Corp.’s reimbursement obligations
will survive for a period of three years following the closing of the acquisition. Global Petroleum Corp.’s reimbursement
obligations expired in January 2018, and any and all remediation expenses will be our responsibility.
In the event that we sell, within eight years of the closing of the acquisition, all or substantially all of the real property
underlying the Revere terminal to a third party not affiliated with Global Petroleum Corp. or us and such third party does not
intend to use the real property for petroleum‑related purposes, then we will pay Global Petroleum Corp. an amount equal to fifty
percent of the net proceeds (as defined in the purchase agreement) received by us in connection with such sale.
Relationship of Management with Global Petroleum Corp.
Some members of our management team are also officers and/or directors of our affiliate, Global Petroleum Corp.
Global Petroleum Corp. is wholly owned by ASRS Global General Partnership, an entity that is owned equally by Richard Slifka
and by the Alfred A. Slifka 1990 Trust Under Article II-A. Messrs. Faneuil and Spencer spend a portion of their time providing
services to Global Petroleum Corp. under a shared services agreement. Please read “—Shared Services Agreement.”
Policies Relating to Conflicts of Interest
Conflicts of interest exist and may arise in the future as a result of the relationships between our general partner and its
affiliates, on the one hand, and us and our unaffiliated limited partners, on the other hand. The directors and officers of our
general partner have fiduciary duties to manage our general partner in a manner beneficial to its owners. At the same time, our
general partner has a fiduciary duty to manage us in a manner beneficial to our unitholders and us. Our partnership agreement
modifies and limits our general partner’s fiduciary duties to unitholders. Our partnership agreement also restricts the remedies
available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under
applicable Delaware law. The Delaware Revised Uniform Limited Partnership Act provides that Delaware limited partnerships
may, in their partnership agreements, expand, restrict or eliminate the fiduciary duties otherwise owed by a general partner to
limited partners and the partnership.
Under our partnership agreement, whenever a conflict arises between our general partner or its affiliates, on the one
hand, and us or any other partner, on the other, our general partner will resolve that conflict. Our general partner will not be in
breach of its obligations under our partnership agreement or its duties to us or our unitholders if the resolution of the conflict is:
·
·
·
·
approved by the conflicts committee of our general partner, although our general partner is not obligated to seek
such approval;
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our
general partner or any of its affiliates;
on terms no less favorable to us than those generally being provided to or available from unaffiliated third parties;
or
fair and reasonable to us, taking into account the totality of the relationships between the parties involved,
including other transactions that may be particularly favorable or advantageous to us.
Our general partner may, but is not required to, seek the approval of such resolution from the conflicts committee of the
board of directors of our general partner. If our general partner does not seek approval from the conflicts committee and its board
of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the
standards set forth in the third and fourth bullet points above, then it will be presumed that, in making its decision, the board acted
in good faith, and in any proceeding brought by or on behalf of us or any limited partner of ours, the person bringing or
prosecuting such proceeding will have the burden of overcoming such presumption. Unless the resolution of a conflict is
specifically provided for in our partnership agreement, our
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general partner or the conflicts committee may consider any factors it determines in good faith to consider when resolving a
conflict. When our partnership agreement requires someone to act in good faith, it requires that person to reasonably believe that
he is acting in the best interests of the partnership, unless the context otherwise requires.
Director Independence
Please read Part III, Item 10, “Directors, Executive Officers and Corporate Governance” for information regarding
director independence.
Item 14. Principal Accounting Fees and Services.
The audit committee of the board of directors of Global GP LLC selected Ernst & Young LLP, Independent Registered
Public Accounting Firm, to audit the books, records and accounts of Global Partners LP for the 2019 and 2018 calendar years.
The audit committee’s charter, which is available on our website at www.globalp.com, requires the audit committee to approve in
advance all audit and non‑audit services to be provided by our independent registered public accounting firm. All services
reported in the audit, audit‑related, tax and all other fees categories below were approved by the audit committee.
Pre‑approved fees to Ernst & Young LLP for the fiscal years ended December 31, 2019 and 2018 were as follows (in
thousands):
Audit Fees (1)
Audit—Related Fees
Tax Fees (2)
Total
2018
2019
4,060 $ 4,495
122
1,455
5,706 $ 6,072
117
1,529
$
$
(1) Represents fees for professional services provided primarily in connection with the audits of our annual financial statements
and reviews of our quarterly financial statements. Audit fees also included Ernst & Young’s audits of the effectiveness of our
internal control over financial reporting at December 31, 2019 and 2018.
(2) Tax fees included tax planning and tax return preparation.
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Item 15. Exhibits and Financial Statement Schedules.
PART IV
(a) The following documents are included with the filing of this Annual Report:
1.
2.
Financial statements—See “Index to Financial Statements” on page F‑1.
Financial statement schedules—Schedule II—Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulation of the Securities
and Exchange Commission are not required under the related instructions or are inapplicable and,
therefore, have been omitted.
3.
Exhibits—The following is a list of exhibits required by Item 601 of Registration S-K to be filed as part of
this Annual Report.
Description
—
Exhibit
Number
2.1**
3.1
3.2
4.1
4.2
4.3
4.4*
4.5*
10.1
10.2
10.3
—
—
—
—
—
—
—
—
—
Agreement of Purchase and Sale dated as of January 14, 2015 between Global Revco Dock, L.L.C, Global
Revco Terminal, L.L.C., Global South Terminal, L.L.C., Global Petroleum Corp. and Global Companies LLC
(incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8‑K filed on January 21, 2015
(File No. 001‑32593)).
Certificate of Limited Partnership of Global Partners LP (incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-1 filed on May 10, 2005).
Fourth Amended and Restated Agreement of Limited Partnership of Global Partners LP dated as of August 7,
2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 7,
2018).
Registration Rights Agreement, dated March 1, 2012, by and among Global Partners LP and AE Holdings
Corp. (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8‑K filed on March 7,
2012).
Indenture, dated as of June 4, 2015, among the Issuers, the Guarantors and Deutsche Bank Trust Company
Americas, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
on June 4, 2015).
Indenture, dated as of July 31, 2019, among the Issuers, the Guarantors and Deutsche Bank Trust Company
Americas, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
on July 31, 2019).
— Description of Common Units registered under Section 12 of the Exchange Act.
Description of 9.75% Series A Fixed-to-Floating Cumulative Redeemable Perpetual Preferred Units
registered under Section 12 of the Exchange Act.
Omnibus Agreement, dated October 4, 2005, by and among Global Petroleum Corp., Montello Oil
Corporation, Global Revco Dock, L.L.C., Global Revco Terminal, L.L.C., Global South Terminal, L.L.C.,
Sandwich Terminal, L.L.C., Chelsea Terminal Limited Partnership, Global GP LLC, Global Partners LP,
Global Operating LLC, Alfred A. Slifka, Richard Slifka and Eric Slifka (incorporated herein by reference to
Exhibit 10.1 to the Current Report on Form 8‑K filed on October 11, 2005).
Terminals Sale and Purchase Agreement, dated March 16, 2007 by and between Global Partners LP and
ExxonMobil Oil Corporation (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on
Form 10‑Q filed on August 9, 2007).
Terminals Sale and Purchase Agreement, dated July 9, 2007 by and between Global Partners LP and
ExxonMobil Oil Corporation (incorporated herein by reference to Exhibit 10.21 to the Annual Report on
Form 10‑K filed on March 14, 2008).
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10.4^
10.5
10.6
10.7
10.8††
10.9
10.10
10.11^
10.12^
10.13^
10.14^
10.15^
10.16
10.17^
10.18^
10.19^
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Supplemental Executive Retirement Plan dated December 31, 2009, between Global GP LLC and Edward J.
Faneuil (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8‑K filed on
January 7, 2010).
Sale and Purchase Agreement, dated May 24, 2010 among ExxonMobil Oil Corporation and Exxon Mobil
Corporation, as sellers, and Global Companies LLC (incorporated herein by reference to Exhibit 10.4 to the
Quarterly Report on Form 10‑Q filed on August 6, 2010).
First Amendment to Sale and Purchase Agreement, effective August 12, 2010 among ExxonMobil Oil
Corporation and Exxon Mobil Corporation, as sellers, and Global Companies LLC (incorporated herein by
reference to Exhibit 10.1 to the Current Report on Form 8‑K filed on August 31, 2010).
Second Amendment to Sale and Purchase Agreement, dated September 7, 2010, among ExxonMobil Oil
Corporation and Exxon Mobil Corporation, as sellers, and Global Companies LLC, as buyer (incorporated
herein by reference to Exhibit 10.1 to the Current Report on Form 8‑K filed on September 9, 2010).
Brand Fee Agreement, dated September 3, 2010, between ExxonMobil Oil Corporation and Global
Companies LLC (incorporated herein by reference to Exhibit 10.6 to the Quarterly Report on Form 10‑Q/A
filed on January 20, 2011).
Assignment of Branded Wholesaler PMPA Franchise Agreements, effective March 1, 2011 between Global
Companies LLC, Alliance Energy LLC and ExxonMobil Oil Corporation (incorporated herein by reference to
Exhibit 10.49 to the Annual Report on Form 10‑K filed on March 11, 2011).
Business Opportunity Agreement dated March 1, 2012, by and among Alfred A. Slifka, Richard Slifka and
Global Partners LP (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8‑K filed
on March 7, 2012).
Deferred Compensation Agreement dated September 23, 2009, by and between Alliance Energy LLC and
Edward J. Faneuil (incorporated herein by reference to Exhibit 10.53 to the Annual Report on Form 10‑K
filed on March 12, 2012).
Global Partners LP Long‑Term Incentive Plan (as Amended and Restated Effective June 22, 2012)
(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8‑K filed on June 25, 2012).
Form of Phantom Unit Award Agreement for Directors under Global Partners LP Long‑Term Incentive Plan
(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8‑K filed on July 3, 2013).
Form of Confidentiality, Non‑Solicitation, and Non‑Competition Agreement for Phantom Unit Award
Recipients (incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8‑K filed on
July 3, 2013).
Form of Director Unit Award Letter (incorporated herein by reference to Exhibit 10.46 to the Annual Report
on Form 10‑K filed on March 13, 2015).
Second Amended and Restated Services Agreement, dated as of March 11, 2015, by and among Global
Petroleum Corp. and Global Companies LLC (incorporated herein by reference to Exhibit 10.49 to the
Annual Report on Form 10‑K filed on March 13, 2015).
Form of Restricted Unit Award Grant Letter (incorporated herein by reference to Exhibit 10.2 to the
Quarterly Report on Form 10‑Q filed on August 7, 2015).
Form of Cash Award Grant Letter (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report
on Form 10‑Q filed on August 7, 2015).
Form of Phantom Unit Agreement (Cash Settlement) (incorporated herein by reference to Exhibit 10.1 to the
Quarterly Report on Form 10‑Q filed on November 6, 2015).
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10.20†††
—
Third Amended and Restated Credit Agreement, dated as of April 25, 2017, among Global Operating LLC,
Global Companies LLC, Global Montello Group Corp., Glen Hes Corp., Chelsea Sandwich LLC, GLP
Finance Corp., Global Energy Marketing LLC, Global CNG LLC, Alliance Energy LLC, Cascade Kelly
Holdings LLC and Warren Equities, Inc. as borrowers, Bank of America, N.A., as Administrative Agent,
Swing Line Lender, Alternative Currency Fronting Lender and L/C Issuer, JPMorgan Chase Bank, N.A. as an
L/C Issuer, JPMorgan Chase Bank, N.A. and Wells Fargo Bank, N.A. as Co-Syndication Agents, Citizens
Bank, N.A., Societe Generale, BNP Paribas and The Bank of Tokyo-Mitsubishi UFJ, Ltd. NY Branch as Co-
Documentation Agents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase
Bank, N.A., Wells Fargo Securities, LLC, Citizens Bank N.A., Societe Generale, BNP Paribas, and The Bank
of Tokyo-Mitsubishi UFJ, Ltd. NY Branch as Joint Lead Arrangers and Joint Book Managers (incorporated
herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q‑Q filed on May 9, 2017).
Form of Phantom Unit Award Agreement for Executive Officers under Global Partners LP Long-Term
Incentive Plan (incorporated herein by reference to Exhibit 99.1 to the Current Report on Form 8‑K filed on
August 22, 2017).
Global Partners LP 2018 Long-Term Cash Incentive Plan (incorporated herein by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed on October 12, 2018).
First Amendment to Third Amended and Restated Credit Agreement dated September 10, 2018 (incorporated
herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10‑Q filed on November 8, 2018).
Second Amendment to Third Amended and Restated Credit Agreement dated September 10, 2018
(incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10‑Q filed on November 8,
2018).
Employment Agreement effective as of February 1, 2019, by and between Global GP LLC and Eric S. Slifka
(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 5,
2019).
Employment Agreement effective as of January 1, 2019, by and between Global GP LLC and Mark Romaine
(incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on February 5,
2019).
Employment Agreement effective as of January 1, 2019, by and between Global GP LLC and Daphne H.
Foster (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on
February 5, 2019).
Employment Agreement effective as of January 1, 2019, by and between Global GP LLC and Edward J.
Faneuil (incorporated herein by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on
February 5, 2019).
Employment Agreement effective as of January 1, 2019, by and between Global GP LLC and Andrew P.
Slifka (incorporated herein by reference to Exhibit 10.6 to the Current Report on Form 8-K filed on
February 5, 2019).
Employment Agreement effective as of January 1, 2019, by and between Global GP LLC and Matthew
Spencer (incorporated herein by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on
February 5, 2019).
Global Partners LP 2018 Long-Term Cash Incentive Plan Award Agreement (incorporated herein by
reference to Exhibit 10.2 to the Quarterly Report on Form 10-K filed on November 7, 2019).
Third Amendment to Third Amended and Restated Credit Agreement and First Amendment to Third
Amended and Restated Security Agreement, dated as of April 19, 2019 (incorporated herein by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q filed on May 9, 2019).
—
—
—
—
—
—
—
—
—
—
—
—
— List of Subsidiaries of Global Partners LP.
— Consent of Ernst & Young LLP.
—
Rule 13a‑14(a)/15d‑14(a) Certification of Principal Executive Officer of Global GP LLC, general partner of
Global Partners LP.
10.21^
10.22^
10.23
10.24
10.25^
10.26^
10.27^
10.28^
10.29^
10.30^
10.31^
10.32
21.1*
23.1*
31.1*
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Table of Contents
31.2*
32.1†
32.2†
—
—
—
Rule 13a‑14(a)/15d‑14(a) Certification of Principal Financial Officer of Global GP LLC, general partner of
Global Partners LP.
Section 1350 Certification of Chief Executive Officer of Global GP LLC, general partner of Global
Partners LP.
Section 1350 Certification of Chief Financial Officer of Global GP LLC, general partner of Global
Partners LP.
101.INS* — XBRL Instance Document.
101.SCH* — XBRL Taxonomy Extension Schema Document.
101.CAL* — XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB* — XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE* — XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF* — XBRL Taxonomy Extension Definition Linkbase Document.
* Filed herewith.
^ Management contract or compensatory plan or arrangement.
** Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S‑K. The Partnership
undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the U.S. Securities
and Exchange Commission.
† Not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of
that section.
†† Portions of this exhibit have been omitted pursuant to an order granting confidential treatment, dated February 14, 2011 (SEC
File No. 001-32593).
††† Portions of this exhibit have been omitted pursuant to an order granting confidential treatment, dated June 15, 2017 (SEC File
No. 001-32593).
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
Dated: March 6, 2020
Global Partners LP
By: Global GP LLC,
its general partner
By:
/s/ Eric Slifka
Eric Slifka
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated on March 6, 2020.
Signature
/s/ Eric Slifka
Eric Slifka
/s/ Daphne H. Foster
Daphne H. Foster
/s/ Matthew Spencer
Matthew Spencer
/s/ Andrew Slifka
Andrew Slifka
/s/ Richard Slifka
Richard Slifka
/s/ David K. McKown
David K. McKown
/s/ Robert J. McCool
Robert J. McCool
/s/ Kenneth I. Watchmaker
Kenneth I. Watchmaker
/s/ John T. Hailer
John T. Hailer
Title
President, Chief Executive Officer, Vice Chairman and Director
(Principal Executive Officer)
Chief Financial Officer and Director
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Executive Vice President and Director
Chairman
Director
Director
Director
Director
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Table of Contents
INDEX TO FINANCIAL STATEMENTS
GLOBAL PARTNERS LP FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Partners’ Equity for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
F‑2
F‑4
F‑5
F‑6
F‑7
F‑8
F‑9
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Global GP LLC and Unitholders of Global Partners LP
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Global Partners LP (the Partnership) as of December 31, 2019
and 2018, and the related consolidated statements of operations, comprehensive income (loss), partners’ equity, and cash flows
for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in
the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2019 and
2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated March 6, 2020 expressed an unqualified opinion thereon.
Adoption of ASU No. 2016-02
As discussed in Note 3 to the consolidated financial statements, effective January 1, 2019, the Partnership changed its method for
accounting for leases due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842).
Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on
the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Partnership’s auditor since 2004.
Boston, Massachusetts
March 6, 2020
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Global GP LLC and Unitholders of Global Partners LP
Opinion on Internal Control over Financial Reporting
We have audited Global Partners LP's internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (the COSO criteria). In our opinion, Global Partners LP (the Partnership) maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) the
consolidated balance sheets as of December 31, 2019 and 2018 and the related consolidated statements of operations, comprehensive income
(loss), partners’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes of the
Partnership and our report dated March 6, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management's Annual Report. Our responsibility is to
express an opinion on the Partnership's internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 6, 2020
F-3
Table of Contents
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In thousands, except unit data
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net (less allowance of $2,729 and $2,433 at December 31, 2019 and
2018, respectively)
Accounts receivable—affiliates
Inventories
Brokerage margin deposits
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right of use assets, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and partners’ equity
Current liabilities:
Accounts payable
Working capital revolving credit facility—current portion
Lease liability—current portion
Environmental liabilities—current portion
Trustee taxes payable
Accrued expenses and other current liabilities
Derivative liabilities
Total current liabilities
Working capital revolving credit facility—less current portion
Revolving credit facility
Senior notes
Long-term lease liability—less current portion
Environmental liabilities—less current portion
Financing obligations
Deferred tax liabilities
Other long—term liabilities
Total liabilities
Commitments and contingencies (see Note 11)
Partners’ equity
Global Partners LP equity:
December 31,
2019
2018
$
12,042 $
8,121
$
$
413,195
7,823
450,482
34,466
4,564
81,940
1,004,512
1,104,863
296,746
46,765
324,474
31,067
2,808,427 $
373,386 $
148,900
68,160
5,009
42,932
102,802
12,698
753,887
175,000
192,700
690,533
239,349
54,262
148,127
42,879
52,451
2,349,188
—
334,777
5,435
386,442
14,766
26,390
98,977
874,908
1,132,632
—
58,532
327,406
30,813
2,424,291
308,979
103,300
—
6,092
42,613
117,274
4,494
582,752
150,000
220,000
664,455
—
57,132
149,997
42,856
57,905
1,925,097
—
Series A preferred limited partners (2,760,000 units issued and outstanding at December 31,
2019 and 2018)
Common limited partners (33,995,563 units issued and 33,867,393 outstanding at
December 31, 2019 and 33,995,563 units issued and 33,751,435 outstanding at
December 31, 2018)
General partner interest (0.67% interest with 230,303 equivalent units outstanding at
December 31, 2019 and 2018)
Accumulated other comprehensive loss
Total Global Partners LP equity
Noncontrolling interest
Total partners’ equity
Total liabilities and partners’ equity
67,226
67,226
398,535
437,874
(2,620)
(5,076)
458,065
1,174
459,239
2,808,427 $
(2,509)
(5,260)
497,331
1,863
499,194
2,424,291
$
The accompanying notes are an integral part of these consolidated financial statements.
F-4
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GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
Sales
Cost of sales
Gross profit
Costs and operating expenses:
Selling, general and administrative expenses
Operating expenses
(Gain) loss on trustee taxes
Lease exit and termination gain
Amortization expense
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Total costs and operating expenses
Operating income
Interest expense
Loss on early extinguishment of debt
Income before income tax (expense) benefit
Income tax (expense) benefit
Net income
Net loss attributable to noncontrolling interest
Net income attributable to Global Partners LP
$
2019
13,081,730 $
12,418,973
662,757
Year Ended December 31,
2018
12,672,602 $
12,022,193
650,409
2017
8,920,552
8,337,500
583,052
170,937
342,382
—
(493)
11,431
(2,730)
2,022
523,549
139,208
(89,856)
(13,080)
36,272
(1,094)
35,178
689
35,867
171,002
321,115
(52,627)
(3,506)
10,960
5,880
414
453,238
197,171
(89,145)
—
108,026
(5,623)
102,403
1,502
103,905
155,033
283,650
16,194
—
9,206
(1,624)
809
463,268
119,784
(86,230)
—
33,554
23,563
57,117
1,635
58,752
394
—
58,358
1.74
1.74
33,589
33,634
Less: General partner’s interest in net income, including incentive
distribution rights
Less: Series A preferred limited partner interest in net income
Net income attributable to common limited partners
Basic net income per common limited partner unit
Diluted net income per common limited partner unit
Basic weighted average common limited partner units outstanding
Diluted weighted average common limited partner units outstanding
$
$
$
1,379
6,728
27,760 $
0.82 $
0.81 $
33,810
34,339
1,033
2,691
100,181 $
2.97 $
2.95 $
33,701
33,972
The accompanying notes are an integral part of these consolidated financial statements.
F-5
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GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
2019
Net income
Other comprehensive income (loss):
Change in fair value of cash flow hedges
Change in pension liability
Total other comprehensive income (loss)
Comprehensive income
Comprehensive loss attributable to noncontrolling interest
Comprehensive income attributable to Global Partners LP
$
$
Year Ended December 31,
2018
102,403 $
$
35,178
2
182
184
35,362
689
36,051
$
133
75
208
102,611
1,502
104,113 $
2017
57,117
1,037
(1,064)
(27)
57,090
1,635
58,725
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Amortization of deferred financing fees
Amortization of leasehold interests
Amortization of senior notes discount
Bad debt expense
Unit-based compensation expense
Write-off of financing fees
Gain on trustee taxes
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Loss on early extinguishment of debt
Deferred income taxes
Changes in operating assets and liabilities, excluding net assets acquired:
Accounts receivable
Accounts receivable-affiliate
Inventories
Broker margin deposits
Prepaid expenses, all other current assets and other assets
Accounts payable
Trustee taxes payable
Change in derivatives
Accrued expenses, all other current liabilities and other long-term liabilities
Net cash provided by operating activities
Cash flows from investing activities
Acquisitions
Capital expenditures
Seller note issuances
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issuance of Series A preferred units
Net borrowings from (payments on) working capital revolving credit facility
Net (payments on) borrowings from revolving credit facility
Proceeds from senior notes, net
Repayment of senior notes
LTIP units withheld for tax obligations
Noncontrolling interest capital contribution
Distribution to noncontrolling interest
Distributions to limited partners and general partner
Net cash (used in) provided by financing activities
Cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental information
Cash paid during the period for interest
Net cash (received) paid during the period for income taxes
Year Ended December 31,
2018
2019
2017
$
35,178 $
102,403 $
57,117
108,192
5,038
—
902
560
1,966
188
—
(2,730)
2,022
13,080
23
(78,978)
(2,388)
(64,790)
(19,700)
14,413
64,407
319
30,030
(13,330)
94,402
—
(82,864)
(1,410)
17,060
(67,214)
—
70,600
(27,300)
392,602
(381,886)
(657)
—
—
(76,626)
(23,267)
106,838
5,372
327
1,501
588
2,738
—
(52,627)
5,880
414
—
2,751
81,898
(1,662)
(29,778)
(5,085)
(15,912)
(4,433)
(15,081)
(31,764)
14,488
168,856
(171,620)
(69,174)
(3,337)
18,411
(225,720)
66,366
26,600
24,000
—
—
(835)
—
—
(66,004)
50,127
3,921
8,121
12,042 $
67,436 $
(5,208) $
(6,737)
14,858
8,121 $
67,163 $
653 $
$
$
$
105,652
5,644
631
1,445
211
2,755
573
—
(1,624)
809
—
(25,949)
3,886
(630)
173,167
17,972
(13,674)
(6,850)
9,155
2,346
15,806
348,442
(38,479)
(49,866)
(6,086)
32,787
(61,644)
—
(197,900)
(20,700)
—
—
(522)
279
(465)
(62,660)
(281,968)
4,830
10,028
14,858
62,512
7,356
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
(In thousands)
Partners' Equity
Balance at December 31, 2016
Net income (loss)
Noncontrolling interest capital contribution
Distributions to limited partners and general partner
Distribution to noncontrolling interest
Unit-based compensation
Other comprehensive loss
LTIP units withheld for tax obligations
Dividends on repurchased units
Balance at December 31, 2017
Issuance of Series A preferred units
Net income (loss)
Distributions to limited partners and general partner
Unit-based compensation
Other comprehensive income
LTIP units withheld for tax obligations
Dividends on repurchased units
Balance at December 31, 2018
Net income (loss)
Distributions to limited partners and general partner
Unit-based compensation
Other comprehensive income
LTIP units withheld for tax obligations
Dividends on repurchased units
Balance at December 31, 2019
Series A
Accumulated
Other
Loss
Interest
Total
Partners Interest
Preferred Common General
Limited Limited Partner Comprehensive Noncontrolling Partners’
Equity
Partners
5,186 $ 397,841
$
57,117
(1,635)
279
279
(63,316)
—
(465)
(465)
2,755
—
(27)
—
(522)
—
656
—
394,318
3,365
66,366
—
102,403
(1,502)
(66,139)
—
2,738
—
208
—
(835)
—
135
—
499,194
1,863
35,178
(689)
(77,740)
—
1,966
—
184
—
(657)
—
1,114
—
1,174 $ 459,239
58,358
—
(62,892)
—
2,755
—
(522)
656
399,399
—
100,181
(63,744)
2,738
—
(835)
135
437,874
27,760
(69,522)
1,966
—
(657)
1,114
67,226 $ 398,535 $ (2,620) $
— $ 401,044 $ (2,948) $
—
—
—
—
—
—
—
—
—
66,366
2,691
(1,831)
—
—
—
—
67,226
6,728
(6,728)
—
—
—
—
(5,441) $
—
—
—
—
—
(27)
—
—
(5,468)
—
—
—
—
208
—
—
(5,260)
—
—
—
184
—
—
(5,076) $
394
—
(424)
—
—
—
—
—
(2,978)
—
1,033
(564)
—
—
—
—
(2,509)
1,379
(1,490)
—
—
—
—
$
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation
Organization
Global Partners LP (the “Partnership”) is a master limited partnership formed in March 2005. The Partnership owns,
controls or has access to one of the largest terminal networks of refined petroleum products and renewable fuels in Massachusetts,
Maine, Connecticut, Vermont, New Hampshire, Rhode Island, New York, New Jersey and Pennsylvania (collectively, the
“Northeast”). The Partnership is one of the region’s largest independent owners, suppliers and operators of gasoline stations and
convenience stores. As of December 31, 2019, the Partnership had a portfolio of 1,551 owned, leased and/or supplied gasoline
stations, including 289 directly operated convenience stores, primarily in the Northeast. The Partnership is also one of the largest
distributors of gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in the New
England states and New York. The Partnership engages in the purchasing, selling, gathering, blending, storing and logistics of
transporting petroleum and related products, including gasoline and gasoline blendstocks (such as ethanol), distillates (such as
home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil and propane and in the transportation of petroleum
products and renewable fuels by rail from the mid‑continent region of the United States and Canada.
Global GP LLC, the Partnership’s general partner (the “General Partner”), manages the Partnership’s operations and
activities and employs its officers and substantially all of its personnel, except for most of its gasoline station and convenience
store employees who are employed by Global Montello Group Corp. (“GMG”), a wholly owned subsidiary of the Partnership.
The General Partner, which holds a 0.67% general partner interest in the Partnership, is owned by affiliates of the Slifka
family. As of December 31, 2019, affiliates of the General Partner, including its directors and executive officers and their
affiliates, owned 7,402,198 common units, representing a 21.8% limited partner interest.
2019 and Recent Events
2027 Notes Offering and 2022 Notes Tender Offer and Redemption— On July 31, 2019, the Partnership and GLP
Finance Corp. (the “Issuers”) issued $400.0 million aggregate principal amount of 7.00% senior notes due 2027 (the “2027
Notes”) to several initial purchasers (the “2027 Notes Initial Purchasers”) in a private placement exempt from the registration
requirements under the Securities Act of 1933, as amended (the “Securities Act”). The Partnership used the net proceeds from the
offering to fund the repurchase of its 6.25% senior notes due 2022 (the “2022 Notes”) in a tender offer and to repay a portion of
the borrowings outstanding under its credit agreement. The redemption of the 2022 Notes occurred on August 30, 2019. See
Note 8, “Debt and Financing Obligations—Senior Notes” for additional information on the 2027 Notes.
On February 18, 2020, the Partnership completed an exchange offer whereby holders of the 2027 Notes exchanged all of
the 2027 Notes for an equivalent amount of senior notes registered under the Securities Act. The exchange notes are substantially
identical to the 2027 Notes, except that the exchange notes are not subject to the restrictions on transfers or to any increase in
annual interest rates for failure to comply with the 2027 Notes Registration Rights Agreement (defined below).
Amended Credit Agreement— On April 19, 2019, the Partnership and certain of its subsidiaries entered into the third
amendment to third amended and restated credit agreement which, among other things, extended the maturity date from April 30,
2020 to April 29, 2022 and reduced by 0.25% the applicable rate under the existing revolving credit facility for borrowings of
base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit. See Note 8 for
additional information on the credit agreement.
F-9
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 2. Summary of Significant Accounting Policies
Basis of Consolidation and Presentation
On July 24, 2018, the Partnership acquired the assets of company-operated gasoline stations and convenience stores
from New Hampshire-based Cheshire Oil Company, LLC (“Cheshire”). On July 17, 2018, the Partnership acquired retail fuel and
convenience store assets from Vermont-based Champlain Oil Company, Inc. (“Champlain”). On October 18, 2017, the
Partnership acquired retail gasoline and convenience store assets from Honey Farms, Inc. (“Honey Farms”). The financial results
of Cheshire, Champlain and Honey Farms since the respective acquisition date are included in the accompanying consolidated
statements of operations. See Note 20, “Business Combinations,” for additional information on the Partnership’s acquisitions.
The accompanying consolidated financial statements as of December 31, 2019 and 2018 and for the years ended
December 31, 2019, 2018 and 2017 reflect the accounts of the Partnership. Upon consolidation, all intercompany balances and
transactions have been eliminated.
Noncontrolling Interest
These financial statements reflect the application of Accounting Standards Codification (“ASC”) Topic 810,
“Consolidations” (“ASC 810”) which establishes accounting and reporting standards that require: (i) the ownership interest in
subsidiaries held by parties other than the parent to be clearly identified and presented in the consolidated balance sheet within
shareholder’s equity, but separate from the parent’s equity, (ii) the amount of consolidated net income attributable to the parent
and the noncontrolling interest to be clearly identified and presented on the face of the consolidated statements of operations, and
(iii) changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary to be
accounted for consistently.
The Partnership acquired a 60% interest in Basin Transload LLC (“Basin Transload”) on February 1, 2013. After
evaluating ASC 810, the Partnership concluded it is appropriate to consolidate the balance sheet and statements of operations of
Basin Transload based on an evaluation of the outstanding voting interests. Amounts pertaining to the noncontrolling ownership
interest held by third parties in the financial position and operating results of the Partnership are reported as a noncontrolling
interest in the accompanying consolidated balance sheets and statements of operations.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions.
Among the estimates made by management are (i) estimated fair value of assets and liabilities acquired in a business combination
and identification of associated goodwill and intangible assets, (ii) fair value of derivative instruments, (iii) accruals and
contingent liabilities, (iv) allowance for doubtful accounts, (v) assumptions used to evaluate goodwill, property and equipment
and intangibles for impairment, (vi) environmental and asset retirement obligation provisions, (vii) cost of sales accrual, and
(viii) weighted average discount rate used in lease accounting. Although the Partnership believes these estimates are reasonable,
actual results could differ from these estimates.
F-10
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Cash and Cash Equivalents
The Partnership considers highly liquid investments with original maturities of three months or less at the time of
purchase to be cash equivalents. The carrying value of cash and cash equivalents, including broker margin accounts, approximates
fair value.
Accounts Receivable
The Partnership’s accounts receivable primarily results from sales of refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane to its customers. The majority of the Partnership’s accounts receivable relates to its
petroleum marketing activities that can generally be described as high volume and low margin activities. The Partnership makes a
determination of the amount, if any, of a line of credit it may extend to a customer based on the form and amount of financial
performance assurances the Partnership requires. Such financial assurances are commonly provided to the Partnership in the form
of standby letters of credit, personal guarantees or corporate guarantees.
The Partnership reviews all accounts receivable balances on a monthly basis and records a reserve for estimated amounts
it expects will not be fully recovered. At December 31, 2019 and 2018, substantially all of the Partnership’s accounts receivable
were classified as current assets and there were no non-standard payment terms.
Inventories
The Partnership hedges substantially all of its petroleum and ethanol inventory using a variety of instruments, primarily
exchange-traded futures contracts. These futures contracts are entered into when inventory is purchased and are either designated
as fair value hedges against the inventory on a specific barrel basis for inventories qualifying for fair value hedge accounting or
not designated and maintained as economic hedges against certain inventory of the Partnership on a specific barrel basis. Changes
in fair value of these futures contracts, as well as the offsetting change in fair value on the hedged inventory, are recognized in
earnings as an increase or decrease in cost of sales. All hedged inventory designated in a fair value hedge relationship is valued
using the lower of cost, as determined by specific identification, or net realizable value, as determined at the product level. All
petroleum and ethanol inventory not designated in a fair value hedging relationship is carried at the lower of historical cost, on a
first-in, first-out basis, or net realizable value. Renewable Identification Numbers (“RINs”) inventory is carried at the lower of
historical cost, on a first-in, first-out basis, or net realizable value. Convenience store inventory is carried at the lower of historical
cost, based on a weighted average cost method, or net realizable value.
Inventories consisted of the following at December 31 (in thousands):
Distillates: home heating oil, diesel and kerosene
Gasoline
Gasoline blendstocks
Crude oil
Residual oil
Propane and other
Renewable identification numbers (RINs)
Convenience store inventory
Total
2019
222,202 $
120,958
39,702
16,018
26,521
1,356
1,329
22,396
450,482 $
$
$
2018
173,403
93,534
52,195
21,325
21,054
1,447
1,034
22,450
386,442
In addition to its own inventory, the Partnership has exchange agreements for petroleum products and ethanol with
unrelated third‑party suppliers, whereby it may draw inventory from these other suppliers (see Revenue
F-11
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Recognition) and suppliers may draw inventory from the Partnership. Positive exchange balances are accounted for as accounts
receivable and amounted to $9.2 million and $3.8 million at December 31, 2019 and 2018, respectively. Negative exchange
balances are accounted for as accounts payable and amounted to $17.6 million and $14.9 million at December 31, 2019 and 2018,
respectively. Exchange transactions are valued using current carrying costs.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Minor expenditures for routine maintenance,
repairs and renewals are charged to expense as incurred, and major improvements that extend the useful lives of the related assets
are capitalized. Depreciation related to the Partnership’s terminal assets and gasoline stations is charged to cost of sales and all
other depreciation is charged to selling, general and administrative expenses. Depreciation is charged over the estimated useful
lives of the applicable assets using straight‑line methods, and accelerated methods are used for income tax purposes. When
applicable and based on policy, which considers the construction period and project cost, the Partnership capitalizes interest on
qualified long‑term projects and depreciates it over the life of the related asset.
The estimated useful lives are as follows:
Gasoline station buildings, improvements and storage tanks
Buildings, docks, terminal facilities and improvements
Gasoline station equipment
Fixtures, equipment and capitalized internal use software
15-25 years
5-25 years
7 years
3-7 years
The Partnership capitalizes certain costs, including internal payroll and external direct project costs incurred in
connection with developing or obtaining software designated for internal use. These costs are included in property and equipment
and are amortized over the estimated useful lives of the related software.
Intangibles
Intangibles are carried at cost less accumulated amortization. For assets with determinable useful lives, amortization is
computed over the estimated economic useful lives of the respective intangible assets, ranging from 3 to 20 years.
Goodwill and Long-Lived Asset Impairment
Goodwill
Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not
individually identified and separately recognized. The Partnership has concluded that its operating segments are also its reporting
units. Goodwill is tested for impairment annually as of October 1 or when events or changes in circumstances indicate that the
carrying amount of goodwill may not be recoverable. Derecognized goodwill associated with the Partnership’s disposition
activities of Gasoline Distribution and Station Operation (“GDSO”) sites is included in the carrying value of assets sold in
determining the gain or loss on disposal, to the extent the disposition of assets qualifies as a disposition of a business under
ASC 805. The GDSO reporting unit’s goodwill that was derecognized related to the disposition of sites that met the definition of
a business was $2.9 million, $3.9 million and $4.0 million for the years ended December 31, 2019, 2018 and 2017, respectively
(see Note 7).
All of the Partnership’s goodwill is allocated to the GDSO segment. During 2019, 2018 and 2017, the Partnership
completed a quantitative assessment for the GDSO reporting unit. Factors included in the assessment included both
macro‑economic conditions and industry specific conditions, and the fair value of the GDSO reporting unit
F-12
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
was estimated using a weighted average of a discounted cash flow approach and a market comparables approach. Based on the
Partnership’s assessment, no impairment was identified.
Evaluation of Long-Lived Asset Impairment
Accounting and reporting guidance for long‑lived assets requires that a long‑lived asset (group) be reviewed for
impairment when events or changes in circumstances indicate that the carrying amount might not be recoverable. Accordingly,
the Partnership evaluates long-lived assets for impairment whenever indicators of impairment are identified. If indicators of
impairment are present, the Partnership assesses impairment by comparing the undiscounted projected future cash flows from the
long‑lived assets to their carrying value. If the undiscounted cash flows are less than the carrying value, the long‑lived assets will
be reduced to their fair value.
The Partnership recognized an impairment charge of $2.0 million, $0.4 million and $0.8 million for the years ended
December 31, 2019, 2018 and 2017, respectively, relating to long-lived assets at certain gasoline stations and convenience stores.
These assets are allocated to the GDSO segment, and the respective impairment is included in goodwill and long-lived asset
impairment in the accompanying consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017.
Environmental and Other Liabilities
The Partnership accrues for all direct costs associated with the estimated resolution of contingencies at the earliest date
at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated.
Costs accrued are estimated based upon an analysis of potential results, assuming a combination of litigation and settlement
strategies and outcomes.
Estimated losses from environmental remediation obligations generally are recognized no later than completion of the
remedial feasibility study. Loss accruals are adjusted as further information becomes available or circumstances change. Costs of
future expenditures for environmental remediation obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other parties are recognized when related contingencies are
resolved, generally upon cash receipt.
The Partnership is subject to other contingencies, including legal proceedings and claims arising out of its businesses
that cover a wide range of matters, including environmental matters and contract and employment claims. Environmental and
other legal proceedings may also include matters with respect to businesses previously owned. Further, due to the lack of
adequate information and the potential impact of present regulations and any future regulations, there are certain circumstances in
which no range of potential exposure may be reasonably estimated. See Notes 14 and 23.
.
Asset Retirement Obligations
The Partnership is required to account for the legal obligations associated with the long‑lived assets that result from the
acquisition, construction, development or operation of long‑lived assets. Such asset retirement obligations specifically pertain to
the treatment of underground gasoline storage tanks (“USTs”) that exist in those states which statutorily require removal of the
USTs at a certain point in time. Specifically, the Partnership’s retirement obligations consist of the estimated costs of removal and
disposals of USTs. The liability for an asset retirement obligation is recognized on a discounted basis in the year in which it is
incurred, and the discount period applied is based on statutory requirements for UST removal or policy. The associated asset
retirement costs are capitalized as part of the carrying cost of the asset. The Partnership had approximately $8.0 million and
$8.8 million in total asset retirement obligations at
F-13
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2019 and 2018, respectively, which are included in other long‑term liabilities in the accompanying consolidated
balance sheets.
Leases
The Partnership has gasoline station and convenience store leases, primarily of land and buildings. The Partnership has
terminal and dedicated storage facility lease arrangements with various petroleum terminals and third parties, of which certain
arrangements have minimum usage requirements. The Partnership leases barges through various time charter lease arrangements
and railcars through various lease arrangements. The Partnership also has leases for office space, computer and convenience store
equipment and automobiles. The Partnership’s lease arrangements have various expiration dates with options to extend.
The Partnership is also the lessor party to various lease arrangements with various expiration dates, including the leasing
of gasoline stations and certain equipment to third-party station operators and cobranding lease agreements for certain space
within the Partnership’s gasoline stations and convenience stores.
In addition, the Partnership is party to three master unitary lease agreements in connection with (i) the June 2015
acquisition of retail gasoline stations from Capitol Petroleum Group (“Capitol”) related to properties previously sold by Capitol
within two sale-leaseback transactions; and (ii) the June 2016 sale of real property assets at 30 gasoline stations and convenience
stores that did not meet the criteria for sale accounting. These transactions continue to be accounted for as financing obligations
(see Note 8) upon transition to ASC 842, “Leases,” which the Partnership adopted on January 1, 2019.
Accounting and reporting guidance for leases requires that leases be evaluated and classified as either operating or
finance leases by the lessee and as either operating, sales-type or direct financing leases by the lessor. The Partnership’s operating
leases are included in right-of-use (“ROU”) assets, lease liability-current portion and long-term lease liability-less current portion
in the accompanying consolidated balance sheets.
ROU assets represent the Partnership’s right to use an underlying asset for the lease term, and lease liabilities represent
the obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease
commencement date based on the present value of lease payments over the lease term. The Partnership’s variable lease payments
consist of payments that depend on an index or rate (such as the Consumer Price Index) as well as those payments that depend on
the Partnership’s performance or use of the underlying asset related to the lease. Variable lease payments are excluded from the
ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most
of the Partnership’s leases do not provide an implicit rate in determining the net present value of lease payments, the Partnership
uses its incremental borrowing rate based on the information available at the lease commencement date. ROU assets also include
any lease payments made and exclude lease incentives. Many of the Partnership’s lessee agreements include options to extend the
lease, which are not included in the minimum lease terms unless they are reasonably certain to be exercised. Rental expense for
lease payments related to operating leases is recognized on a straight-line basis over the lease term.
Rental income for lease payments received related to operating leases is recognized on a straight-line basis over the lease
term.
The Partnership has elected the package of practical expedients permitted under the transition guidance within the new
standard which, among other things, allows the Partnership to carry forward the historical accounting relating to lease
identification and classification for existing leases upon adoption. Leases with an initial term of 12 months or less are not
recorded on the balance sheet as the Partnership recognizes lease expense for these leases on a straight-line basis over the lease
term.
F-14
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Partnership’s leases have contracted terms as follows:
Gasoline station and convenience store leases
Terminal lease arrangements
Dedicated storage facility leases
Barge and railcar equipment leases
Office space leases
Computer equipment, convenience store equipment and automobile leases
1-20 years
1-5 years
1-5 years
1-10 years
1-12 years
1-5 years
The above table excludes the Partnership’s West Coast facility land lease arrangement which contract term is subject to
expiration through July 2066. Some of the above leases include options to extend the leases for up to an additional 30 years. The
Partnership does not include renewal options in its lease terms for calculating the lease liability unless the Partnership is
reasonably certain the renewal options are to be exercised. The depreciable life of assets and leasehold improvements are limited
by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.
Lease Exit Termination Gain
In December 2016, the Partnership voluntarily terminated early a sublease with a counterparty for 1,610 railcars that
were underutilized due to unfavorable market conditions in the crude oil by rail market. Separately, the Partnership entered into a
fleet management services agreement (effective January 1, 2017) (the “Services Agreement”) with the counterparty, pursuant to
which the Partnership would provide railcar storage, freight, insurance and other services on behalf of the counterparty.
During each of 2019 and 2018, the Partnership was released from certain of its obligations under the Services
Agreement, which resulted in a reduction of the remaining accrued incremental costs of $0.5 million and $3.5 million for the
years ended December 31, 2019 and 2018, respectively, which benefit is included in lease exit and termination gain in the
accompanying statements of operations. The remaining accrued incremental costs were $1.3 million at December 31, 2019.
Revenue Recognition
The Partnership’s sales relate primarily to the sale of refined petroleum products, gasoline blendstocks, renewable fuels,
crude oil and propane and are recognized along with the related receivable upon delivery, net of applicable provisions for
discounts and allowances. The Partnership may also provide for shipping costs at the time of sale, which are included in cost of
sales.
Contracts with customers typically contain pricing provisions that are tied to a market index, with certain adjustments
based on quality and freight due to location differences and prevailing supply and demand conditions, as well as other factors. As
a result, the price of the products fluctuates to remain competitive with other available product supplies. The revenue associated
with such arrangements is recognized upon delivery.
In addition, the Partnership generates revenue from its logistics activities when it stores, transloads and ships products
owned by others. Revenue from logistics services is recognized as services are provided.
Logistics agreements may require counterparties to throughput a minimum volume over an agreed-upon period and may
include make-up rights if the minimum volume is not met. The Partnership recognizes revenue associated with make-up rights at
the earlier of when the make-up volume is shipped, the make-up right expires or when it is determined that the likelihood that the
shipper will utilize the make-up right is remote.
F-15
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Partnership also recognizes convenience store sales of gasoline, grocery and other merchandise and sundries at the
time of the sale to the customer. Gasoline station rental income is recognized on a straight‑line basis over the term of the lease.
Product revenue is not recognized on exchange agreements, which are entered into primarily to acquire various refined
petroleum products, gasoline blendstocks, renewable fuels and crude oil of a desired quality or to reduce transportation costs by
taking delivery of products closer to the Partnership’s end markets. The Partnership recognizes net exchange differentials due
from exchange partners in sales upon delivery of product to an exchange partner. The Partnership recognizes net exchange
differentials due to exchange partners in cost of sales upon receipt of product from an exchange partner.
The amounts recorded for bad debts are generally based upon a specific analysis of aged accounts while also factoring in
any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular
customers. Bad debt provisions are included in selling, general and administrative expenses.
Trustee Taxes
The Partnership collects trustee taxes, which consist of various pass through taxes collected on behalf of taxing
authorities, and remits such taxes directly to those taxing authorities. Examples of trustee taxes include, among other things,
motor fuel excise tax and sales and use tax. As such, it is the Partnership’s policy to exclude trustee taxes from revenues and cost
of sales and account for them as current liabilities. See Note 12 for additional information.
The Partnership may be subject to audits of its state and federal tax returns prepared for trustee taxes. Historically, any
tax adjustments from such audits have been deemed immaterial by the Partnership and have been included in cost of sales. In
November of 2017, the Partnership received an assessment from a state taxing authority in connection with its audit of the
Partnership’s fuel and sales tax returns for the periods from December 2008 through August 2013 (the “Audit”). In February of
2018, the Partnership agreed to administratively close the Audit, and, as a result, recognized a loss on trustee taxes of
$16.2 million during the fourth quarter of 2017, which is included in (gain) loss on trustee taxes in the accompanying
consolidated statements of operations for the year ended December 31, 2017. The loss on trustee taxes consists of both tax and
interest, with no penalties being assessed. Although the Audit has been administratively closed, the Partnership has the right to
seek recovery of the payment of the trustee tax. While the Partnership believes it has meritorious arguments and defenses to
recover a majority of the tax and interest assessed, the Partnership cannot be certain of such outcome.
Volumetric Ethanol Excise Tax Credit—In the first quarter of 2018, the Partnership recognized a one-time income item
of approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise
Tax Credit, which tax credit program expired in 2011. Based upon the significant passage of time from that 2011 expiration date,
including underlying statutes of limitation, as of January 31, 2018 the Partnership determined that the liability was no longer
required. The liability had historically been included in trustee taxes in the accompanying consolidated balance sheets. The
recognition of this one-time income item, which is included in (gain) loss on trustee taxes in the accompanying consolidated
statements of operations for the year ended December 31, 2018, did not impact cash flows from operations for the year ended
December 31, 2018.
Income Taxes
Section 7704 of the Internal Revenue Code provides that publicly‑traded partnerships are, as a general rule, taxed as
corporations. However, an exception, referred to as the “Qualifying Income Exception,” exists under Section 7704(c) with respect
to publicly‑traded partnerships of which 90% or more of the gross income for every taxable year consists of “qualifying income.”
Qualifying income includes income and gains derived from the transportation, storage and marketing of refined petroleum
products, gasoline blendstocks, crude oil and ethanol to resellers and refiners. Other types of qualifying income include interest
(other than from a financial business), dividends, gains from
F-16
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that
otherwise constitutes qualifying income.
Substantially all of the Partnership’s income is “qualifying income” for federal income tax purposes and, therefore, is
not subject to federal income taxes at the partnership level. Accordingly, no provision has been made for income taxes on the
qualifying income in the Partnership’s financial statements. Net income for financial statement purposes may differ significantly
from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of
assets and liabilities and the taxable income allocation requirements under the Partnership’s agreement of limited partnership.
Individual unitholders have different investment basis depending upon the timing and price at which they acquired their common
units. Further, each unitholder’s tax accounting, which is partially dependent upon the unitholder’s tax position, differs from the
accounting followed in the Partnership’s consolidated financial statements. Accordingly, the aggregate difference in the basis of
the Partnership’s net assets for financial and tax reporting purposes cannot be readily determined because information regarding
each unitholder’s tax attributes in the Partnership is not available to the Partnership.
One of the Partnership’s wholly owned subsidiaries, GMG, is a taxable entity for federal and state income tax purposes.
Current and deferred income taxes are recognized on the separate earnings of GMG. The after‑tax earnings of GMG are included
in the earnings of the Partnership. Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes for GMG.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. The Partnership calculates its current and deferred tax provision based on
estimates and assumptions that could differ from actual results reflected in income tax returns filed in subsequent years.
Adjustments based on filed returns are recorded when identified. See Note 13.
Concentration of Risk
Financial instruments that potentially subject the Partnership to concentration of credit risk consist primarily of cash,
cash equivalents, accounts receivable, firm commitments and, under certain circumstances, futures contracts, forward fixed price
contracts, options and swap agreements which may be used to hedge commodity and interest rate risks. The Partnership provides
credit in the normal course of its business. The Partnership performs ongoing credit evaluations of its customers and provides for
credit losses based on specific information and historical trends. Credit risk on trade receivables is minimized as a result of the
Partnership’s large customer base. Losses have historically been within management’s expectations. See Note 9 for a discussion
regarding risk of credit loss related to futures contracts, forward fixed price contracts, options and swap agreements. The
Partnership’s wholesale and commercial customers of refined petroleum products, gasoline blendstocks, renewable fuels, crude
oil and propane are located primarily in the Northeast. The Partnership’s retail gasoline stations and directly operated convenience
stores are also located primarily in the Northeast.
Due to the nature of the Partnership’s businesses and its reliance, in part, on consumer travel and spending patterns, the
Partnership may experience more demand for gasoline during the late spring and summer months than during the fall and winter.
Travel and recreational activities are typically higher in these months in the geographic areas in which the Partnership operates,
increasing the demand for gasoline. Therefore, the Partnership’s volumes in gasoline are typically higher in the second and third
quarters of the calendar year. As demand for some of the Partnership’s refined petroleum products, specifically home heating oil
and residual oil for space heating purposes, is generally greater during the winter months, heating oil and residual oil volumes are
generally higher during the first and fourth quarters of the calendar year. These factors may result in fluctuations in the
Partnership’s quarterly operating results.
F-17
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents the Partnership’s product sales and other revenues as a percentage of the consolidated sales
for the years ended December 31:
Gasoline sales: gasoline and gasoline blendstocks (such as ethanol)
Distillates (home heating oil, diesel and kerosene), residual oil and propane sales
Crude oil sales and crude oil logistics revenue
Convenience store sales, rental income and sundries
Total
2019
2018
2017
75 %
21 %
1 %
3 %
100 %
74 %
22 %
1 %
3 %
100 %
65 %
26 %
5 %
4 %
100 %
The following table presents the Partnership’s product margin (product sales minus product costs) by segment as a
percentage of the consolidated product margin for the years ended December 31:
Wholesale segment
Gasoline Distribution and Station Operations segment
Commercial segment
Total
2019
2018
2017
16 %
80 %
4 %
100 %
19 %
78 %
3 %
100 %
23 %
74 %
3 %
100 %
See Note 21, “Segment Reporting,” for additional information on the Partnership’s operating segments.
The Partnership is dependent on a number of suppliers of fuel‑related products, both domestically and internationally.
The Partnership is dependent on the suppliers being able to source product on a timely basis and at favorable pricing terms. The
loss of certain principal suppliers or a significant reduction in product availability from principal suppliers could have a material
adverse effect on the Partnership, at least in the near term. The Partnership believes that its relationships with its suppliers are
satisfactory and that the loss of any principal supplier could be replaced by new or existing suppliers.
Derivative Financial Instruments
The Partnership principally uses derivative instruments, which include regulated exchange-traded futures and options
contracts (collectively, “exchange-traded derivatives”) and physical and financial forwards and over-the counter (“OTC”) swaps
(collectively, “OTC derivatives”), to reduce its exposure to unfavorable changes in commodity market prices and interest rates.
The Partnership uses these exchange-traded and OTC derivatives to hedge commodity price risk associated with its inventory and
undelivered forward commodity purchases and sales (“physical forward contracts”). The Partnership accounts for derivative
transactions in accordance with ASC Topic 815, “Derivatives and Hedging,” and recognizes derivatives instruments as either
assets or liabilities in the consolidated balance sheet and measures those instruments at fair value. The changes in fair value of the
derivative transactions are presented currently in earnings, unless specific hedge accounting criteria are met.
The fair value of exchange-traded derivative transactions reflects amounts that would be received from or paid to the
Partnership’s brokers upon liquidation of these contracts. The fair value of these exchange-traded derivative transactions is
presented on a net basis, offset by the cash balances on deposit with the Partnership’s brokers, presented as brokerage margin
deposits in the consolidated balance sheets. The fair value of OTC derivative transactions reflects amounts that would be received
from or paid to a third party upon liquidation of these contracts under current market conditions. The fair value of these OTC
derivative transactions is presented on a gross basis as derivative assets or derivative liabilities in the consolidated balance sheets,
unless a legal right of offset exists. The presentation of the change in fair value of the Partnership’s exchange-traded derivatives
and OTC derivative transactions depends on the intended use of the derivative and the resulting designation.
F-18
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Derivatives Accounted for as Hedges – The Partnership utilizes fair value hedges to hedge commodity price risk and interest
rate risk.
Derivatives designated as fair value hedges are used to hedge price risk in commodity inventories and principally
include exchange-traded futures contracts that are entered into in the ordinary course of business. For a derivative instrument
designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting
change in fair value on the hedged item of the risk being hedged. Gains and losses related to fair value hedges are recognized in
the consolidated statements of operations through cost of sales. These futures contracts are settled on a daily basis by the
Partnership through brokerage margin accounts.
Derivatives Not Accounted for as Hedges – The Partnership utilizes petroleum and ethanol commodity contracts and foreign
currency derivatives to hedge price and currency risk in certain commodity inventories and physical forward contracts.
Petroleum and Ethanol Commodity Contracts
The Partnership uses exchange-traded derivative contracts to hedge price risk in certain commodity inventories which do
not qualify for fair value hedge accounting or are not designated by the Partnership as fair value hedges. Additionally, the
Partnership uses exchange-traded derivative contracts, and occasionally financial forward and OTC swap agreements, to hedge
commodity price exposure associated with its physical forward contracts which are not designated by the Partnership as cash flow
hedges. These physical forward contracts, to the extent they meet the definition of a derivative, are considered OTC physical
forwards and are reflected as derivative assets or derivative liabilities in the consolidated balance sheet. The related exchange-
traded derivative contracts (and financial forward and OTC swaps, if applicable) are also reflected as brokerage margin deposits
(and derivative assets or derivative liabilities, if applicable) in the consolidated balance sheet, thereby creating an economic
hedge. Changes in fair value of these derivative instruments are recognized in the consolidated statement of operations through
cost of sales. These exchange-traded derivatives are settled on a daily basis by the Partnership through brokerage margin
accounts.
While the Partnership seeks to maintain a position that is substantially balanced within its commodity product purchase
and sale activities, it may experience net unbalanced positions for short periods of time as a result of variances in daily purchases
and sales and transportation and delivery schedules as well as other logistical issues inherent in the businesses, such as weather
conditions. In connection with managing these positions, the Partnership is aided by maintaining a constant presence in the
marketplace. The Partnership also engages in a controlled trading program for up to an aggregate of 250,000 barrels of
commodity products at any one point in time. Changes in fair value of these derivative instruments are recognized in the
consolidated statement of operations through cost of sales.
Foreign Currency Contracts
The Partnership may use forward foreign currency contracts to hedge certain foreign denominated (Canadian)
commodity product purchases. These forward foreign currency contracts are not designated by the Partnership as hedges and are
reflected as prepaid expenses and other current assets or accrued expenses and other current liabilities in the consolidated balance
sheets. Changes in fair values of these forward foreign currency contracts are reflected in cost of sales.
Margin Deposits
All of the Partnership’s exchange-traded derivative contracts (designated and not designated) are transacted through
clearing brokers. The Partnership deposits initial margin with the clearing brokers, along with variation margin, which is paid or
received on a daily basis, based upon the changes in fair value of open futures contracts and settlement
F-19
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of closed futures contracts. Cash balances on deposit with clearing brokers and open equity are presented on a net basis within
brokerage margin deposits in the consolidated balance sheets.
See Note 9, “Derivative Financial Instruments,” for additional information.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (exit price). The Partnership utilizes market data or assumptions
that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the
inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The
Partnership primarily applies the market approach for recurring fair value measurements and endeavors to utilize the best
available information. Accordingly, the Partnership utilizes valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs. The Partnership is able to classify fair value balances based on the observability of those
inputs. The fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted
quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable
inputs (Level 3 measurement). At each balance sheet reporting date, the Partnership categorizes its financial assets and liabilities
using the three levels of the fair value hierarchy defined as follows:
Level 1—Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active
markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide
pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as the Partnership’s
exchange-traded derivative instruments and pension plan assets.
Level 2—Quoted prices in active markets are not available; however, pricing inputs are either directly or indirectly
observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other
valuation methodologies. These models are primarily industry-standard models that consider various assumptions,
including quoted forward prices for commodities, time value, volatility factors, and current market and contractual
prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these
assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from
observable data or are supported by observable levels at which transactions are executed in the marketplace. Level 2
primarily consists of non-exchange-traded derivatives such as OTC derivatives.
Level 3—Pricing inputs include significant inputs that are generally less observable from objective sources. These
inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Level 3 includes certain OTC forward derivative instruments related to crude oil and propane.
Please see Note 10, “Fair Value Measurements,” for additional information.
Net Income Per Limited Partner Unit
Under the Partnership’s partnership agreement, for any quarterly period, the incentive distribution rights (“IDRs”)
participate in net income only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from
participating in the Partnership’s undistributed net income or losses. Accordingly, the Partnership’s undistributed net income or
losses is assumed to be allocated to the common unitholders and to the General Partner’s general partner interest.
Common units outstanding as reported in the accompanying consolidated financial statements at December 31,
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2019 and 2018 excludes 128,170 and 244,128 common units, respectively, held on behalf of the Partnership pursuant to its
repurchase program (see Note 17). These units are not deemed outstanding for purposes of calculating net income per common
limited partner unit (basic and diluted). For the years ended December 31, 2019 and 2018, the Series A Preferred Units (as
defined in Note 18) are not potentially dilutive securities based on the nature of the conversion feature.
The following table provides a reconciliation of net income and the assumed allocation of net income to the common
limited partners (after deducting amounts allocated to Series A preferred unitholders) for purposes of computing net income per
common limited partner unit for the years presented (in thousands, except per unit data):
Numerator:
Net income attributable to Global Partners LP
Declared distribution
Assumed allocation of undistributed net loss
Assumed allocation of net income
Less net income attributable to Series A preferred limited
partners
Net income attributable to common limited partners
Denominator:
Basic weighted average common units outstanding
Dilutive effect of phantom units
Diluted weighted average common units outstanding
Basic net income per common limited partner unit
Diluted net income per common limited partner unit
Numerator:
Net income attributable to Global Partners LP
Declared distribution
Assumed allocation of undistributed net income
Assumed allocation of net income
Less net income attributable to Series A preferred limited
partners
Net income attributable to common limited partners
Denominator:
Basic weighted average common units outstanding
Dilutive effect of phantom units
Diluted weighted average common units outstanding
Basic net income per common limited partner unit
Diluted net income per common limited partner unit
IDRs
—
1,139
—
1,139
IDRs
—
336
—
336
Year Ended December 31, 2019
Common
Limited
Partners
General
Partner
Interest
$
$
$
$
$
$
$
$
$
$
$
$
34,488
70,372
(35,884)
34,488
$
$
$
1,379
477
(237)
240
$
$
$
6,728
27,760
33,810
529
34,339
0.82
0.81
Year Ended December 31, 2018
Common
Limited
Partners
General
Partner
Interest
1,033
439
258
697
$
$
$
$
$
$
102,872
65,019
37,853
102,872
2,691
100,181
33,701
271
33,972
2.97
2.95
Total
35,867
71,988
(36,121)
35,867
$
$
$
Total
103,905
65,794
38,111
103,905
$
$
$
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Numerator:
Net income attributable to Global Partners LP
Declared distribution
Assumed allocation of undistributed net loss
Assumed allocation of net income
Denominator:
Basic weighted average common units outstanding
Dilutive effect of phantom units
Diluted weighted average common units outstanding
Basic net income per common limited partner unit
Diluted net income per common limited partner unit
Total
58,752
63,316
(4,564)
58,752
$
$
$
Year Ended December 31, 2017
Common
Limited
Partners
General
Partner
Interest
394
424
(30)
394
$
$
$
$
$
$
$
$
$
$
$
58,358
62,892
(4,534)
58,358
33,589
45
33,634
1.74
1.74
IDRs
—
—
—
—
The board of directors of the General Partner declared the following quarterly cash distributions on its common units for
the four quarters ended December 31, 2019:
Cash Distribution Declaration Date
April 29, 2019
July 26, 2019
October 25, 2019
January 27, 2020
Per Unit Cash
Distribution Declared
$
$
$
$
0.5100
0.5150
0.5200
0.5250
Distribution Declared for the
Quarterly Period Ended
March 31, 2019
June 30, 2019
September 30, 2019
December 31, 2019
The board of directors of the General Partner declared the following quarterly cash distributions on its Series A
Preferred Units earned during 2019:
Cash Distribution Declaration Date
January 22, 2019
April 19, 2019
July 22, 2019
October 22, 2019
January 21, 2020
Per Unit Cash
Distribution Declared
$
$
$
$
$
0.609375
0.609375
0.609375
0.609375
0.609375
Distribution Declared for the
Quarterly Period Covering
November 15, 2018 - February 14, 2019
February 15, 2019 - May 14, 2019
May 15, 2019 - August 14, 2019
August 15, 2019 - November 14, 2019
November 15, 2019 - February 14, 2020
See Note 18, “Partners’ Equity, Allocations and Cash Distributions” for further information.
Accounting Standards or Updates Recently Adopted
In August 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
ASU 2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities.” This standard expands
and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the
effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the
application of current guidance related to the assessment of hedge effectiveness. The Partnership adopted this standard on
January 1, 2019 with no material impact on the Partnership’s consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, “Leases,” and has modified the standard thereafter through a series of
amendments, now codified as ASC 842. ASC 842 amends the existing accounting standards for lease accounting, including
requiring lessees to recognize most leases on their balance sheets and making targeted changes to
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
lessor accounting, however lessor accounting under the new standard is substantially unchanged. The Partnership adopted this
standard on January 1, 2019 using a prospective transition approach, which applies the provisions of the new guidance at the
effective date without adjusting the comparative periods presented. The Partnership has elected the package of practical
expedients permitted under the transition guidance within the new standard, which among other things, allowed the Partnership to
carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. The
Partnership made an accounting policy election to keep leases with an initial term of 12 months or less off of the consolidated
balance sheet. The Partnership has conducted analyses, conducted detailed contract reviews, considered expanded disclosure
requirements, assessed internal control impacts and implemented a new lease accounting system as part of evaluating the impacts
of ASU 2016-02 and adopting the accounting guidance. See above for the Partnership’s policy on leases and Note 3 for the
required disclosures under ASC 842.
Accounting Standards or Updates Not Yet Effective
In August 2018, the FASB issued ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This
standard aligns the requirements for capitalizing implementation costs in a cloud computing arrangement with the requirements
for capitalizing implementation costs incurred for an internal-use software license. This standard is effective for annual periods
beginning after December 15, 2019 and interim periods within those annual periods. This guidance may be adopted either
retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Partnership is assessing the
impact this standard will have on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value
Measurement,” which amends existing guidance on disclosure requirements for fair value measurements. This standard requires
prospective application on changes in unrealized gains and losses, the range and weighted average of significant unobservable
inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. The effects of
other amendments must be applied retrospectively to all periods presented. This standard is effective for fiscal years beginning
after December 15, 2019 and interim periods within those fiscal years, with early adoption permitted. The Partnership is assessing
the impact this standard will have on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This standard
requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the
life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to
estimate the losses as well as a specific disaggregation of balances for financial assets are also required. This standard is effective
for annual periods beginning after December 15, 2019 and interim periods within those annual periods. The Partnership does not
expect this standard will have a material effect on its consolidated financial statements.
Note 3. Leases
On January 1, 2019, the Partnership adopted ASC 842 using the prospective transition approach, which applies the
provisions of the new guidance at the effective date without adjusting the comparative periods presented. The adoption of the
lease standard did not result in a cumulative-effect adjustment to opening equity. Results for reporting periods beginning after
January 1, 2019 are presented under ASC 842 while prior period amounts are not adjusted and continue to be reported in
accordance with the Partnership’s historic accounting under ASC 840, “Leases,” (“ASC 840”).
The adoption of ASC 842 resulted in the recognition of ROU assets and lease liabilities of approximately $330.8 million
and $340.8 million, respectively, as of January 1, 2019. The difference between ROU asset and lease liabilities of $10.0 million is
primarily associated with amounts previously recognized on the Partnership’s consolidated balance sheet under ASC 840 and is
recognized net within ROU assets under ASC 842. The standard did not materially
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
impact the Partnership’s consolidated statement of operations or its consolidated statement of cash flows for the year
ended December 31, 2019. See Note 2 for the Partnership’s lease policy and below for the required disclosures under ASC 842.
The following table presents supplemental balance sheet information related to leases at December 31, 2019 (in
thousands):
Assets:
ROU assets - operating
Liabilities:
Current lease liability - operating
Noncurrent lease liability - operating
Total lease liability
Lessee Lease Arrangements
Balance Sheet Location
Right-of-use assets, net
Lease liability - current portion
Lease liability - less current portion
$
$
$
296,746
68,160
239,349
307,509
The following table presents the components of lease cost for the year ended December 31, 2019 (in thousands):
Statement of operations location:
Cost of sales (a)
Selling, general and administrative expenses
Operating expenses (b)
Total lease cost
$
$
57,369
3,094
50,904
111,367
(a)
(b)
Includes short-term lease costs of $2.5 million.
Includes variable lease cost of $6.7 million and short-term leases costs which were immaterial.
Operating lease costs included in cost of sales are primarily associated with leases of barges and railcars and dedicated
storage facility lease arrangements. Operating lease costs included in operating expenses are primarily associated with the leases
of gasoline station and convenience stores and terminal lease arrangements where the Partnership is responsible for operating the
terminal facility. Operating lease costs included in selling, general and administrative expenses are primarily associated with the
leases of office space, computers and automobiles.
The future minimum lease payments to be paid under operating leases in effect and included in the calculation of lease
liabilities at December 31, 2019 were as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total lease payments
Less imputed interest
Total lease liabilities
Current portion
Long-term portion
Total lease liabilities
$
$
$
$
86,156
78,729
54,672
43,501
31,983
85,788
380,829
73,320
307,509
68,160
239,349
307,509
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The future minimum lease payments include $19.7 million related to options to extend lease terms that are reasonably
certain of being exercised and exclude $2.3 million in lease payments that were not fixed at lease commencement or lease
modification and $1.3 million related to minimum lease payments for leases that are less than one year.
Lessor Lease Arrangements
The following table presents the components of lease revenue for the year ended December 31, 2019 (in thousands):
Statement of operations location:
Sales (a)(b)
$
74,184
(a) Lease revenue includes sub-lessor rental income from leased properties of $38.3 million for the year ended December 31,
(b)
2019, where the Partnership is the lessee of the property.
Includes variable lease revenue of $6.4 million for the year ended December 31, 2019 and short-term lease revenue which
was immaterial for the year ended December 31, 2019.
The future minimum lease payments to be received under operating leases in effect at December 31, 2019 were as
follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
$
$
63,012
35,984
19,787
6,547
4,445
11,114
140,889
Supplemental Information Related to Lease Arrangements
The following table presents supplemental information related to leases as of and for the year ended December 31, 2019
(in thousands):
Cash paid for amounts included in the measurement of lease liabilities
Right-of-use assets obtained in exchange for new lease liabilities
Weighted average remaining non-cancellable lease term
Weighted average discount rate as of December 31, 2019
$
$
105,366
54,313
6.0 years
6.65%
Note 4. Revenue from Contracts with Customers
On January 1, 2018, the Partnership adopted ASC 606, “Revenue from Contracts with Customers” (“ASC 606”) using
the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for
reporting periods beginning January 1, 2018 are presented under ASC 606 while prior period amounts are not adjusted and
continue to be reported in accordance with the Partnership’s historic accounting under ASC 605, “Revenue Recognition,”
(“ASC 605”). See Note 2 for the Partnership’s revenue recognition policy and below for the required disclosures under ASC 606.
F-25
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Disaggregation of Revenue
The following table provides the disaggregation of revenue from contracts with customers and other sales by segment
for the periods presented (in thousands):
Revenue from contracts with customers:
Refined petroleum products, renewable fuels, crude oil
and propane
Station operations
Total revenue from contracts with customers
Other sales:
Revenue originating as physical forward contracts and
exchanges
Revenue from leases
Total other sales
Total sales
Revenue from contracts with customers:
Refined petroleum products, renewable fuels, crude oil
and propane
Station operations
Total revenue from contracts with customers
Other sales:
Revenue originating as physical forward contracts and
exchanges
Revenue from leases
Total other sales
Total sales
Nature of Goods and Services
Wholesale
Year Ended December 31, 2019
Commercial
GDSO
Total
$
1,681,426 $
—
1,681,426
3,806,892 $
394,679
4,201,571
794,082 $
—
794,082
6,282,400
394,679
6,677,079
5,746,338
2,102
5,748,440
7,429,866 $
—
72,082
72,082
4,273,653 $
584,129
—
584,129
1,378,211 $
6,330,467
74,184
6,404,651
13,081,730
$
Wholesale
Year Ended December 31, 2018
Commercial
GDSO
Total
$
1,580,156 $
—
1,580,156
4,081,498 $
355,656
4,437,154
769,271 $
—
769,271
6,430,925
355,656
6,786,581
5,308,613
2,021
5,310,634
6,890,790 $
—
71,555
71,555
4,508,709 $
503,832
—
503,832
1,273,103 $
5,812,445
73,576
5,886,021
12,672,602
$
Revenue from Contracts with Customers (ASC 606):
· Refined petroleum products, renewable fuels, crude oil and propane sales—Under the Partnership’s Wholesale,
GDSO and Commercial segments, revenue is recognized at the point where control of the product is transferred to
the customer and collectability is reasonably assured.
· Station operations—Revenue from convenience store sales of grocery and other merchandise and sundries (such as
car wash sales and lottery and ATM commissions) is recognized at the time of the sale to the customer.
F-26
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Revenue:
· Revenue Originating as Physical Forward Contracts and Exchanges—The Partnership’s commodity contracts and
derivative instrument activity include physical forward commodity sale contracts. The Partnership does not take the
normal purchase and sale exemption available under ASC 815, “Derivatives and Hedging,” for any of its physical
forward contracts. This income is recognized under ASC 815 and is included in sales at the contract value at the
point where control of the product is transferred to the customer. Income from net exchange differentials included in
sales is recognized under ASC 845, “Nonmonetary Transactions,” upon delivery of product to exchange partners.
· Revenue from Leases—The Partnership has rental income from gasoline stations and cobranding arrangements and
lease income from space leased to several unrelated third parties at several of the Partnership’s terminals. This
income was recognized under ASC 842 for the year ended December 31, 2019 and under ASC 840, “Leases,” for the
years ended December 31, 2018 and 2017.
Transaction Price Allocated to Remaining Performance Obligations
The Partnership has elected certain of the optional exemptions from the disclosure requirement for remaining
performance obligations for specific situations in which an entity need not estimate variable consideration to recognize revenue.
Accordingly, the Partnership applies the practical expedient in paragraph ASC 606-10-50-14 to its contracts with customers
where revenue is tied to a market-index and does not disclose information about variable consideration from remaining
performance obligations for which the Partnership recognizes revenue.
The fixed component of estimated revenues expected to be recognized in the future related to performance obligations
tied to a market index that are unsatisfied (or partially unsatisfied) at the end of the reporting period are not significant.
Contract Balances
A receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets, is
recognized in the period the Partnership provides services when its right to consideration is unconditional. In contrast, a contract
asset will be recognized when the Partnership has fulfilled a contract obligation but must perform other obligations before being
entitled to payment.
The nature of the receivables related to revenue from contracts with customers and other revenue, as well as contract
assets, are the same, given they are related to the same customers and have the same risk profile and securitization. The
Partnership had no significant contract liabilities at both December 31, 2019 and 2018. Payment terms on invoiced amounts are
typically 2 to 30 days.
A contract liability is recognized when the Partnership has an obligation to transfer goods or services to a customer for
which the Partnership has received consideration (or the amount is due) from the customer.
F-27
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 5. Goodwill and Intangible Assets
The following table presents changes in goodwill, all of which has been allocated to the GDSO segment (in thousands):
Balance at December 31, 2018
Dispositions (1)
Balance at December 31, 2019
$
$
Total
327,406
(2,932)
324,474
(1) Dispositions represent derecognition of goodwill associated with the sale and disposition of certain assets (see Note 7).
Intangible assets consisted of the following (in thousands):
At December 31, 2019
Intangible assets subject to amortization:
Terminalling services
Customer relationships
Supply contracts
Other intangible assets
Total intangible assets
At December 31, 2018
Intangible assets subject to amortization:
Terminalling services
Customer relationships
Supply contracts
Other intangible assets
Total intangible assets
$
$
$
$
Gross
Carrying
Amount
Accumulated
Amortization
Net
Intangible
Assets
Amortization
Period
26,365 $
43,986
87,578
5,195
163,124 $
26,365 $
43,986
87,578
8,575
166,504 $
(16,429) $
(41,630)
(54,655)
(3,645)
(116,359) $
(15,093) $
(41,195)
(46,430)
(5,254)
(107,972) $
9,936
20 years
2,356 2-15 years
32,923 5-15 years
1,550 3-20 years
46,765
11,272
20 years
2,791 2-15 years
41,148 5-15 years
3,321 1-20 years
58,532
The aggregate amortization expense was approximately $11.4 million, $11.0 million and $9.2 million for the years
ended December 31, 2019, 2018 and 2017, respectively. In addition, the Partnership recognized amortization expense related to
leasehold interests of $0, $0.3 million and $0.6 million in 2019, 2018 and 2017, respectively.
F-28
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The estimated annual intangible asset amortization expense for future years ending December 31 is as follows (in
thousands):
2020
2021
2022
2023
2024
Thereafter
Total intangible assets
Note 6. Property and Equipment
$
$
10,839
10,434
7,199
6,768
5,103
6,422
46,765
Property and equipment consisted of the following at December 31 (in thousands):
Buildings and improvements
Land
Fixtures and equipment
Idle plant assets
Construction in process
Capitalized internal use software
Total property and equipment
Less accumulated depreciation
Total
$
$
2019
1,196,502 $
452,104
46,848
30,500
27,951
33,502
1,787,407
682,544
1,104,863 $
2018
1,126,645
456,334
44,479
30,500
37,636
32,127
1,727,721
595,089
1,132,632
Property and equipment includes assets held for sale of $4.6 million and $8.1 million at December 31, 2019 and 2018,
respectively.
At December 31, 2019, the Partnership had a $44.5 million remaining net book value of long-lived assets at its West
Coast facility, including $30.5 million related to the Partnership’s ethanol plant acquired in 2013. In 2016, the Partnership shifted
the facility from crude oil to ethanol transloading and began transloading ethanol. The Partnership would need to take certain
measures to prepare the facility for ethanol production in order to place the plant into service and commence depreciation.
Therefore, the $30.5 million related to the ethanol plant was included in property and equipment and classified as idle plant
assets at December 31, 2019 and 2018.
If the Partnership is unable to generate cash flows to support the recoverability of the plant and facility assets, this may
become an indicator of potential impairment of the West Coast facility. The Partnership believes these assets are recoverable but
continues to monitor the market for ethanol, the continued business development of this facility for ethanol or other product
transloading, and the related impact this may have on the facility’s operating cash flows and whether this would constitute an
impairment indicator.
Construction in process in 2019 included $23.1 million in costs related to the Partnership’s gasoline stations and
$4.8 million in costs related to the Partnership’s terminals.
Construction in process in 2018 included $28.0 million in costs related to the Partnership’s gasoline stations and
$9.6 million in costs related to the Partnership’s terminals.
F-29
Table of Contents
Depreciation
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Depreciation expense allocated to cost of sales was approximately $87.9 million, $86.9 million and $88.5 million for
the years ended December 31, 2019, 2018 and 2017, respectively.
Depreciation expense allocated to selling, general and administrative expenses was approximately $8.8 million,
$9.0 million and $7.9 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Note 7. Sale and Disposition of Assets
The following table provides the Partnership’s (gain) loss on sale and dispositions of assets for the years ended
December 31 (in thousands):
Sale of natural gas brokerage and electricity businesses
Periodic divestiture of gasoline stations
Strategic asset divestiture program - Real estate firm coordinated sale
Loss on assets held for sale
Other
Total
Sale of Natural Gas and Electricity Brokerage Businesses
2019
2018
2017
$
$
— $
(2,481)
(2,046)
1,660
137
(2,730) $
— $ (14,172)
818
1,603
9,988
139
(1,624)
(263)
995
4,650
498
5,880 $
On February 1, 2017, the Partnership completed the sale of its natural gas marketing and electricity brokerage businesses
for a purchase price of approximately $17.3 million, subject to customary closing adjustments. Proceeds from the sale amounted
to approximately $16.3 million, and the Partnership realized a gain on the sale of $14.2 million for the year ended December 31,
2017. Prior to the sale, the results of the natural gas marketing and electricity brokerage businesses were included in the
Commercial segment.
Periodic Divestiture of Gasoline Stations
As part of the routine course of operations in the GDSO segment, the Partnership may periodically divest certain
gasoline stations. The gain or loss on the sale, representing cash proceeds less net book value of assets and recognized liabilities
at disposition, net of settlement and dispositions costs, is recorded in net (gain) loss on sale and disposition of assets in the
accompanying consolidated statements of operations and amounted to a (gain) loss of ($2.5 million), ($0.3 million) and
$0.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Strategic Asset Divestiture Program
The Partnership identified certain non-strategic GDSO sites that are part of its Strategic Asset Divestiture Program (the
“Divestiture Program”). The gain or loss on the sales of these sites, representing cash proceeds less net book value of assets and
recognized liabilities at disposition, net of settlement and dispositions costs, is recorded in net (gain) loss on sale and disposition
of assets in the accompanying consolidated statements of operations.
Real Estate Firm Coordinated Sales—The Partnership has retained a real estate firm to coordinate the continuing sale of
non-strategic GDSO sites. The Partnership sold 16 sites during the year ended December 31, 2019. The Partnership recognized a
gain of ($2.0 million) on the sales of these sites for the year ended December 31, 2019, including the derecognition of
$2.9 million of GDSO goodwill.
The Partnership recognized losses of $1.0 million and $1.6 million on the sales of sites for the years ended
F-30
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
December 31, 2018 and 2017, respectively, including the derecognition of $3.9 million and $4.0 million of GDSO goodwill for
these respective periods.
Loss on Assets Held for Sale
In conjunction with the periodic divestiture of gasoline stations and the sale of sites within the Divestiture Program, the
Partnership may classify certain gasoline station assets as held for sale. Impairment charges related to assets held for sale are
included in net (gain) loss on sale and disposition of assets in the accompanying consolidated statements of operations.
The Partnership classified 7 sites as held for sale at December 31, 2019 associated with the periodic divestiture of
gasoline station sites and the real estate firm coordinated sales discussed above. The Partnership recorded impairment charges
related to these assets held for sale in the amount of $1.7 million for the year ended December 31, 2019.
The Partnership recorded impairment charges related to assets held for sale associated with the periodic divestiture of
gasoline station sites and the real estate firm coordinated sales in the amount of $4.7 million and $10.0 million for the years ended
December 31, 2018 and 2017, respectively.
Assets held for sale of $4.6 million and $8.1 million at December 31, 2019 and 2018, respectively, are included in
property and equipment in the accompanying consolidated balance sheets. Assets held for sale are expected to be sold within the
next 12 months.
Other
The Partnership recognizes gains and losses on the sale and disposition of other assets, including vehicles, fixtures and
equipment, and the gain or loss on such other assets are included in other in the aforementioned table.
Note 8. Debt and Financing Obligations
Credit Agreement
Certain subsidiaries of the Partnership, as borrowers, and the Partnership and certain of its subsidiaries, as guarantors,
have a $1.3 billion senior secured credit facility (the “Credit Agreement”). The Credit Agreement matures on April 29, 2022.
There are two facilities under the Credit Agreement:
·
·
a working capital revolving credit facility to be used for working capital purposes and letters of credit in the
principal amount equal to the lesser of the Partnership’s borrowing base and $850.0 million; and
a $450.0 million revolving credit facility to be used for general corporate purposes.
In addition, the Credit Agreement has an accordion feature whereby the Partnership may request on the same terms and
conditions then applicable to the Credit Agreement, provided no Event of Default (as defined in the Credit Agreement) then
exists, an increase to the working capital revolving credit facility, the revolving credit facility, or both, by up to another
$300.0 million, in the aggregate, for a total credit facility of up to $1.6 billion. Any such request for an increase must be in a
minimum amount of $25.0 million. The Partnership cannot provide assurance, however, that its lending group will agree to fund
any request by the Partnership for additional amounts in excess of the total available commitments of $1.3 billion.
F-31
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In addition, the Credit Agreement includes a swing line pursuant to which Bank of America, N.A., as the swing line
lender, may make swing line loans in U.S. dollars in an aggregate amount equal to the lesser of (a) $75.0 million and (b) the
Aggregate WC Commitments (as defined in the Credit Agreement). Swing line loans will bear interest at the Base Rate (as
defined in the Credit Agreement). The swing line is a sub-portion of the working capital revolving credit facility and is not an
addition to the total available commitments of $1.3 billion.
Availability under the working capital revolving credit facility is subject to a borrowing base which is redetermined from
time to time and based on specific advance rates on eligible current assets. Under the Credit Agreement, borrowings under the
working capital revolving credit facility cannot exceed the then current borrowing base. Availability under the borrowing base
may be affected by events beyond the Partnership’s control, such as changes in petroleum product prices, collection cycles,
counterparty performance, advance rates and limits and general economic conditions. These and other events could require the
Partnership to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. The
Partnership can provide no assurance that such waivers, amendments or alternative financing could be obtained or, if obtained,
would be on terms acceptable to the Partnership.
Borrowings under the working capital revolving credit facility bear interest at (1) the Eurocurrency rate plus 2.00% to
2.50%, (2) the cost of funds rate plus 2.00% to 2.50%, or (3) the base rate plus 1.00% to 1.50%, each depending on the Utilization
Amount (as defined in the Credit Agreement). Borrowings under the revolving credit facility bear interest at (1) the Eurocurrency
rate plus 1.75% to 2.75%, (2) the cost of funds rate plus 1.75% to 2.75%, or (3) the base rate plus 0.75% to 1.75%, each
depending on the Combined Total Leverage Ratio (as defined in the Credit Agreement).
The average interest rates for the Credit Agreement were 4.3%, 4.0% and 3.7% for the years ended December 31, 2019,
2018 and 2017, respectively.
The Credit Agreement provides for a letter of credit fee equal to the then applicable working capital rate or then
applicable revolver rate (each such rate as defined in the Credit Agreement) per annum for each letter of credit issued. In addition,
the Partnership incurs a commitment fee on the unused portion of each facility under the Credit Agreement, ranging from 0.35%
to 0.50% per annum.
The Partnership classifies a portion of its working capital revolving credit facility as a current liability and a portion as a
long-term liability. The portion classified as a long-term liability represents the amounts expected to be outstanding during the
entire year based on an analysis of historical daily borrowings under the working capital revolving credit facility, the seasonality
of borrowings, forecasted future working capital requirements and forward product curves, and because the Partnership has a
multi-year, long-term commitment from its bank group. Accordingly, at December 31, 2019, the Partnership estimated working
capital revolving credit facility borrowings will equal or exceed $175.0 million over the next twelve months and, therefore,
classified $148.9 million as the current portion at December 31, 2019, representing the amount the Partnership expects to pay
down over the next twelve months. The long-term portion of the working capital revolving credit facility was $175.0 million and
$150.0 million at December 31, 2019 and 2018, respectively, and the current portion was $148.9 million and $103.3 million at
December 31, 2019 and 2018, respectively. The increase in total borrowings under the working capital revolving credit facility of
$70.6 million from December 31, 2018 was primarily due to higher prices.
As of December 31, 2019, the Partnership had total borrowings outstanding under the Credit Agreement of
$516.6 million, including $192.7 million outstanding on the revolving credit facility. In addition, the Partnership had outstanding
letters of credit of $123.2 million. Subject to borrowing base limitations, the total remaining availability for borrowings and
letters of credit was $660.2 million and $770.7 million at December 31, 2019 and 2018, respectively.
The Credit Agreement is secured by substantially all of the assets of the Partnership and the Partnership’s wholly-owned
subsidiaries and is guaranteed by the Partnership and its subsidiaries, Bursaw Oil LLC, Global Partners
F-32
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Energy Canada ULC, Warex Terminals Corporation, Drake Petroleum Company, Inc., Puritan Oil Company, Inc. and Maryland
Oil Company, Inc.
The Credit Agreement imposes certain requirements on the borrowers including, for example, a prohibition against
distributions if any potential default or Event of Default (as defined in the Credit Agreement) would occur as a result thereof, and
certain limitations on the Partnership’s ability to grant liens, make certain loans or investments, incur additional indebtedness or
guarantee other indebtedness, make any material change to the nature of the Partnership’s businesses or undergo a fundamental
change, make any material dispositions, acquire another company, enter into a merger, consolidation, or sale-leaseback
transaction or purchase of assets.
The Credit Agreement also includes certain baskets, including: (i) a $25.0 million general secured indebtedness basket,
(ii) a $25.0 million general investment basket, (iii) a $75.0 million secured indebtedness basket to permit the borrowers to enter
into a Contango Facility (as defined in the Credit Agreement), (iv) a Sale/Leaseback Transaction (as defined in the Credit
Agreement) basket of $100.0 million, and (v) a basket of $50.0 million in an aggregate amount for the purchase of common units
of the Partnership, provided that no Event of Default exists or would occur immediately following such purchase(s).
In addition, the Credit Agreement provides the ability for the borrowers to repay certain junior indebtedness, subject to a
$100.0 million cap, so long as no Event of Default has occurred or will exist immediately after making such repayment.
The Credit Agreement imposes financial covenants that require the Partnership to maintain certain minimum working
capital amounts, a minimum combined interest coverage ratio, a maximum senior secured leverage ratio and a maximum total
leverage ratio. The Partnership was in compliance with the foregoing covenants at December 31, 2019. The Credit Agreement
also contains a representation whereby there can be no event or circumstance, either individually or in the aggregate, that has had
or could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement). In addition, the Credit
Agreement limits distributions by the Partnership to its unitholders to the amount of Available Cash (as defined in the
Partnership’s partnership agreement).
Deferred Financing Fees
The Partnership incurs bank fees related to its Credit Agreement and other financing arrangements. These deferred
financing fees are capitalized and amortized over the life of the Credit Agreement or other financing arrangements. In 2019, the
Partnership capitalized additional financing fees of $13.5 million, consisting of $7.4 million in connection with the issuance of the
2027 Notes and $6.1 million in connection with the amendment to the Credit Agreement (discussed below). The Partnership had
unamortized deferred financing fees of $18.0 million and $10.5 million at December 31, 2019 and 2018, respectively.
Unamortized fees related to the Credit Agreement are included in other current assets and other long-term assets and
amounted to $7.8 million and $5.5 million at December 31, 2019 and 2018, respectively. Unamortized fees related to the senior
notes are presented as a direct deduction from the carrying amount of that debt liability and amounted to $9.5 million and
$4.2 million at December 31, 2019 and 2018, respectively. Unamortized fees related to the Sale-Leaseback Transaction are
presented as a direct deduction from the carrying amount of the financing obligation and amounted to $0.7 million and
$0.8 million at December 31, 2019 and 2018, respectively.
On April 19, 2019, the Partnership entered into the Third Amendment to Third Amended and Restated Credit Agreement
which, among other things, extended the maturity date from April 30, 2020 to April 29, 2022 and reduced by 0.25% the
applicable rate under the existing revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of
funds rate loans and for issuances of letters of credit. As a result, the Partnership incurred expenses of approximately $0.2 million
associated with the write-off of a portion of the related deferred financing fees. These
F-33
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
expenses are included in interest expense in the accompanying consolidated statement of operations for year ended December 31,
2019.
On April 25, 2017, the Partnership entered into a Third Amended and Restated Credit Agreement, a facility that
extended the maturity date and reduced the total commitment. As a result, the Partnership incurred expenses of approximately
$0.6 million associated with the write-off of a portion of the related deferred financing fees. These expenses are included in
interest expense in the accompanying consolidated statement of operations for the year ended December 31, 2017.
Amortization expense of approximately $5.0 million, $5.4 million and $5.6 million for the years ended December 31,
2019, 2018 and 2017, respectively, is included in interest expense in the accompanying consolidated statements of operations.
Supplemental cash flow information
The following table presents supplemental cash flow information related to the Credit Agreement for the years ended
December 31 (in thousands):
Borrowings from working capital revolving credit facility
Payments on working capital revolving credit facility
Net borrowings from (payments on) working capital revolving credit facility
Borrowings from revolving credit facility
Payments on revolving credit facility
Net (payments on) borrowings from revolving credit facility
2019
1,758,700 $
(1,688,100)
2018
2,002,700 $
(1,976,100)
70,600 $
— $
(27,300)
(27,300) $
26,600 $
166,000 $
(142,000)
24,000 $
2017
1,311,700
(1,509,600)
(197,900)
36,300
(57,000)
(20,700)
$
$
$
$
Senior Notes
7.00% Senior Notes Due 2027
On July 31, 2019, the Issuers issued $400.0 million aggregate principal amount of 7.00% senior notes due 2027 to the
2027 Notes Initial Purchasers in a private placement exempt from the registration requirements under the Securities Act. The
Partnership used the net proceeds from the offering to fund the repurchase of the 2022 Notes in a tender offer and to repay a
portion of the borrowings outstanding under its Credit Agreement. The redemption of the 2022 Notes occurred on August 30,
2019.
As a result of the repurchase of the 2022 Notes, the Partnership recorded a $13.1 million loss from early extinguishment
of debt for the year ended December 31, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-
off of remaining unamortized original issue discount and deferred financing fees.
2027 Notes Indenture
In connection with the private placement of the 2027 Notes on July 31, 2019, the Issuers and the subsidiary guarantors
and Deutsche Bank Trust Company Americas, as trustee, entered into an indenture (the “2027 Notes Indenture”).
The 2027 Notes will mature on August 1, 2027 with interest accruing at a rate of 7.00% per annum and payable semi-
annually in arrears on February 1 and August 1 of each year, commencing February 1, 2020. The 2027 Notes are guaranteed on a
joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
set forth in the 2027 Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal
amount of the 2027 Notes may declare the 2027 Notes immediately due and payable, except that an event of default resulting
from entry into a bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of the Partnership
that is a significant subsidiary or any group of its restricted subsidiaries that, taken together, would constitute a significant
subsidiary of the Partnership, will automatically cause the 2027 Notes to become due and payable.
Prior to August 1, 2022, the Issuers have the option to redeem up to 35% of the 2027 Notes in an amount not greater
than the net cash proceeds of certain equity offerings at a redemption price (expressed as a percentage of principal amount) of
107% plus accrued and unpaid interest, if any. The Issuers have the option to redeem the 2027 Notes, in whole or in part, at any
time on or after August 1, 2022, at the redemption prices of 103.500% for the twelve-month period beginning on August 1, 2022,
102.333% for the twelve-month period beginning August 1, 2023, 101.167% for the twelve-month period beginning August 1,
2024, and 100% beginning on August 1, 2025 and at any time thereafter, together with any accrued and unpaid interest to the date
of redemption. In addition, before August 1, 2022, the Issuers may redeem all or any part of the 2027 Notes at a redemption price
equal to the sum of the principal amount thereof, plus a make whole premium, plus accrued and unpaid interest, if any, to the
redemption date. The holders of the 2027 Notes may require the Issuers to repurchase the 2027 Notes following certain asset sales
or a Change of Control Triggering Event (as defined in the 2027 Notes Indenture) at the prices and on the terms specified in the
2027 Notes Indenture.
The 2027 Notes Indenture contains covenants that will limit the Partnership’s ability to, among other things, incur
additional indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and
other restricted payments, restrict distributions by its subsidiaries, create liens, sell assets or merge with other entities. Events of
default under the 2027 Notes Indenture include (i) a default in payment of principal of, or interest or premium, if any, on, the
2027 Notes, (ii) breach of the Partnership’s covenants under the 2027 Notes Indenture, (iii) certain events of bankruptcy and
insolvency, (iv) any payment default or acceleration of indebtedness of the Partnership or certain subsidiaries if the total amount
of such indebtedness unpaid or accelerated exceeds $50.0 million and (v) failure to pay within 60 days uninsured final judgments
exceeding $50.0 million.
2027 Notes Registration Rights Agreement
On July 31, 2019, the Issuers and the subsidiary guarantors entered into a registration rights agreement (the “2027 Notes
Registration Rights Agreement”) with the 2027 Notes Initial Purchasers in connection with the Issuers’ private placement of the
2027 Notes. Under the 2027 Notes Registration Rights Agreement, the Issuers and the subsidiary guarantors agreed to file and use
commercially reasonable efforts to cause to become effective a registration statement relating to an offer to exchange the 2027
Notes for an issue of notes with terms identical to the 2027 Notes (except that the exchange notes will not be subject to
restrictions on transfer or to any increase in annual interest rate for failure to comply with the 2027 Notes Registration Rights
Agreement) that are registered under the Securities Act so as to permit the exchange offer to be consummated by September 23,
2020. The exchange offer was completed on February 18, 2020, and 100% of the 2027 Notes were exchanged for SEC-registered
notes.
7.00% Senior Notes Due 2023
On June 1, 2015, the Issuers entered into a Purchase Agreement with the Initial Purchasers (as defined therein) (the
“2023 Notes Initial Purchasers”) pursuant to which the Issuers agreed to sell $300.0 million aggregate principal amount of the
Issuers’ 7.00% senior notes due 2023 (the “2023 Notes”) to the 2023 Notes Initial Purchasers in a private placement exempt from
the registration requirements under the Securities Act. The 2023 Notes were resold by the 2023 Notes Initial Purchasers to
qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
outside the United States pursuant to Regulation S under the Securities Act.
2023 Notes Indenture
In connection with the private placement of the 2023 Notes on June 4, 2015 the Issuers and the subsidiary guarantors
and Deutsche Bank Trust Company Americas, as trustee, entered into an indenture (the “2023 Notes Indenture”).
The 2023 Notes will mature on June 15, 2023 with interest accruing at a rate of 7.00% per annum and payable semi-
annually in arrears on June 15 and December 15 of each year, commencing December 15, 2015. The 2023 Notes are guaranteed
on a joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent set forth in the
2023 Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal amount of the
2023 Notes may declare the 2023 Notes immediately due and payable, except that an event of default resulting from entry into a
bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of the Partnership that is a
significant subsidiary or any group of its restricted subsidiaries that, taken together, would constitute a significant subsidiary of
the Partnership, will automatically cause the 2023 Notes to become due and payable.
The Issuers have the option to redeem the 2023 Notes, in whole or in part, at the redemption prices of 103.500% for the
twelve-month period beginning June 15, 2019, 101.750% for the twelve-month period beginning June 15, 2020, and 100.0%
beginning June 15, 2021 and at any time thereafter, together with any accrued and unpaid interest to the date of redemption. The
holders of the 2023 Notes may require the Issuers to repurchase the 2023 Notes following certain asset sales or a Change of
Control (as defined in the 2023 Notes Indenture) at the prices and on the terms specified in the 2023 Notes Indenture.
The 2023 Notes Indenture contains covenants that will limit the Partnership’s ability to, among other things, incur
additional indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and
other restricted payments, restrict distributions by its subsidiaries, create liens, enter into sale-leaseback transactions, sell assets or
merge with other entities. Events of default under the 2023 Notes Indenture include (i) a default in payment of principal of, or
interest or premium, if any, on, the 2023 Notes, (ii) breach of the Partnership’s covenants under the 2023 Notes Indenture,
(iii) certain events of bankruptcy and insolvency, (iv) any payment default or acceleration of indebtedness of the Partnership or
certain subsidiaries if the total amount of such indebtedness unpaid or accelerated exceeds $50.0 million and (v) failure to pay
within 60 days uninsured final judgments exceeding $50.0 million.
Financing Obligations
Capitol Acquisition
On June 1, 2015, the Partnership acquired retail gasoline stations and dealer supply contracts from Capitol Petroleum
Group (“Capitol”). In connection with the acquisition, the Partnership assumed a financing obligation of $89.6 million associated
with two sale-leaseback transactions by Capitol for 53 leased sites that did not meet the criteria for sale accounting. During the
terms of these leases, which expire in May 2028 and September 2029, in lieu of recognizing lease expense for the lease rental
payments, the Partnership incurs interest expense associated with the financing obligation. Interest expense of approximately
$9.3 million, $9.4 million and $9.6 million was recorded for the years ended December 31, 2019, 2018 and 2017, respectively,
and is included in interest expense in the accompanying consolidated statements of operations. The financing obligation will
amortize through expiration of the leases based upon the lease rental payments which were $9.9 million, $9.7 million and
$9.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. The financing obligation balance outstanding
at December 31, 2019 was $87.0 million
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
associated with the Capitol acquisition.
Sale-Leaseback Transaction
On June 29, 2016, the Partnership sold to a premier institutional real estate investor (the “Buyer”) real property assets,
including the buildings, improvements and appurtenances thereto, at 30 gasoline stations and convenience stores located in
Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island (the “Sale-Leaseback Sites”) for a purchase price of
approximately $63.5 million. In connection with the sale, the Partnership entered into a Master Unitary Lease Agreement with the
Buyer to lease back the real property assets sold with respect to the Sale-Leaseback Sites (such Master Lease Agreement, together
with the Sale-Leaseback Sites, the “Sale-Leaseback Transaction”). The Master Unitary Lease Agreement provides for an initial
term of fifteen years that expires in 2031. The Partnership has one successive option to renew the lease for a ten-year period
followed by two successive options to renew the lease for five-year periods on the same terms, covenants, conditions and rental as
the primary non-revocable lease term. The Partnership does not have any residual interest nor the option to repurchase any of the
sites at the end of the lease term. The proceeds from the Sale-Leaseback Transaction were used to reduce indebtedness
outstanding under the Partnership’s revolving credit facility.
The sale did not meet the criteria for sale accounting as of December 31, 2019 due to prohibited continuing involvement.
Specifically, the sale is considered a partial-sale transaction, which is a form of continuing involvement as the Partnership did not
transfer to the Buyer the storage tank systems which are considered integral equipment of the Sale-Leaseback Sites. Additionally,
a portion of the sold sites have material sub-lease arrangements, which is also a form of continuing involvement. As the sale of
the Sale-Leaseback Sites did not meet the criteria for sale accounting, the Partnership did not recognize a gain or loss on the sale
of the Sale-Leaseback Sites for the year ended December 31, 2019.
As a result of not meeting the criteria for sale accounting for these sites, the Sale-Leaseback Transaction is accounted for
as a financing arrangement. As such, the property and equipment sold and leased back by the Partnership has not been
derecognized and continues to be depreciated. The Partnership recognized a corresponding financing obligation of $62.5 million
equal to the $63.5 million cash proceeds received for the sale of these sites, net of $1.0 million financing fees. During the term of
the lease, which expires in June 2031, in lieu of recognizing lease expense for the lease rental payments, the Partnership incurs
interest expense associated with the financing obligation. Lease rental payments are recognized as both interest expense and a
reduction of the principal balance associated with the financing obligation. Interest expense was $4.4 million for each of the years
ended December 31, 2019, 2018 and 2017, and lease rental payments were $4.6 million, $4.5 million and $4.5 million for the
years ended December 31, 2019, 2018 and 2017, respectively. The financing obligation balance outstanding at December 31,
2019 was $62.3 million associated with the Sale-Leaseback Transaction.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 9. Derivative Financial Instruments
The following table summarizes the notional values related to the Partnership’s derivative instruments outstanding at
December 31, 2019:
Exchange-Traded Derivatives
Long
Short
OTC Derivatives (Petroleum/Ethanol)
Long
Short
Units (1)
Unit of Measure
51,838
(55,869)
Thousands of barrels
Thousands of barrels
9,237
(6,934)
Thousands of barrels
Thousands of barrels
(1) Number of open positions and gross notional values do not measure the Partnership’s risk of loss, quantify risk or represent assets or
liabilities of the Partnership, but rather indicate the relative size of the derivative instruments and are used in the calculation of the
amounts to be exchanged between counterparties upon settlements.
Derivatives Accounted for as Hedges
Fair Value Hedges
The Partnership’s fair value hedges include exchange-traded futures contracts and OTC derivative contracts that are
hedges against inventory with specific futures contracts matched to specific barrels. The change in fair value of these futures
contracts and the change in fair value of the underlying inventory generally provide an offset to each other in the consolidated
statement of operations.
The following table presents the gains and losses from the Partnership’s derivative instruments involved in fair value
hedging relationships recognized in the consolidated statements of operations for the years ended December 31 (in thousands):
Derivatives in fair value hedging relationship
Exchange-traded futures contracts and OTC derivative contracts
for petroleum commodity products
Hedged items in fair value hedge relationship
Physical inventory
Cash Flow Hedges
Statement of Gain (Loss)
Recognized in Income on
Derivatives
2019
2018
2017
Cost of sales
$
10,640 $
5,566 $
26,118
Cost of sales
$ (10,532) $
(9,686) $
(23,247)
The Partnership had no cash flow hedges in 2019. The Partnership’s cash flow hedges in 2018 and 2017 primarily
included one interest rate swap which became effective on October 2, 2013 and expired on October 2, 2018 and was used to
hedge the variability in cash flows in monthly interest payments due to changes in the one month LIBOR swap curve with respect
to $100.0 million of one month LIBOR based borrowings on the credit facility at a fixed rate of 1.819%.
The amount of gain (loss) recognized in other comprehensive income as effective for derivatives designated in cash flow
hedging relationships was $0.1 million and $1.0 million for the years ended December 31, 2018 and 2017. The
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
amount of gain (loss) recognized in income as ineffectiveness for derivatives designated in cash flow hedging relationships was
$0 for each of the years ended December 31, 2018 and 2017.
Derivatives Not Accounted for as Hedges
The following table presents the gains and losses from the Partnership’s derivative instruments not involved in a hedging
relationship recognized in the consolidated statements of operations for the years ended December 31 (in thousands):
Derivatives not designated as
hedging instruments
Commodity contracts
Statement of Gain (Loss)
Recognized in
Income on Derivatives
Cost of sales
2019
2018
2017
$
14,528
$
3,783
$
9,502
Commodity Contracts and Other Derivative Activity
The Partnership’s commodity contracts and other derivative activity include: (i) exchange-traded derivative contracts
that are hedges against inventory and either do not qualify for hedge accounting or are not designated in a hedge accounting
relationship, (ii) exchange-traded derivative contracts used to economically hedge physical forward contracts, (iii) financial
forward and OTC swap agreements used to economically hedge physical forward contracts and (iv) the derivative instruments
under the Partnership’s controlled trading program. The Partnership does not take the normal purchase and sale exemption
available under ASC 815 for any of its physical forward contracts.
The following table presents the fair value of each classification of the Partnership’s derivative instruments and its
location in the consolidated balance sheets at December 31, 2019 and 2018 (in thousands):
Asset Derivatives:
Exchange-traded derivative contracts
Forward derivative contracts (1)
Total asset derivatives
Liability Derivatives:
Exchange-traded derivative contracts
Forward derivative contracts (1)
Total liability derivatives
Balance Sheet Location
Broker margin deposits
Derivative assets
Broker margin deposits
Derivative liabilities
F-39
December 31, 2019
Derivatives Derivatives Not
Designated as
Designated as
Hedging
Instruments
Hedging
Instruments
Total
$
$
$
$
— $
—
— $
31,645 $
4,564
36,209 $
31,645
4,564
36,209
(3,838) $
—
(3,838) $
(26,354) $
(12,698)
(39,052) $
(30,192)
(12,698)
(42,890)
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Asset Derivatives:
Exchange-traded derivative contracts
Forward derivative contracts (1)
Total asset derivatives
Liability Derivatives:
Exchange-traded derivative contracts
Forward derivative contracts (1)
Total liability derivatives
Balance Sheet Location
Broker margin deposits
Derivative assets
Broker margin deposits
Derivative liabilities
December 31, 2018
Derivatives Derivatives Not
Designated as
Designated as
Hedging
Instruments
Hedging
Instruments
Total
$
$
$
$
5,121 $
—
5,121 $
120,992 $
26,390
147,382 $
126,113
26,390
152,503
— $
—
— $
(42,496) $
(4,494)
(46,990) $
(42,496)
(4,494)
(46,990)
(1) Forward derivative contracts include the Partnership’s petroleum and ethanol physical and financial forwards and OTC swaps.
Credit Risk
The Partnership’s derivative financial instruments do not contain credit risk related to other contingent features that
could cause accelerated payments when these financial instruments are in net liability positions.
The Partnership is exposed to credit loss in the event of nonperformance by counterparties to the Partnership’s
exchange-traded and OTC derivative contracts, but the Partnership has no current reason to expect any material nonperformance
by any of these counterparties. Exchange-traded derivative contracts, the primary derivative instrument utilized by the
Partnership, are traded on regulated exchanges, greatly reducing potential credit risks. The Partnership utilizes major financial
institutions as its clearing brokers for all New York Mercantile Exchange (“NYMEX”), Chicago Mercantile Exchange (“CME”)
and Intercontinental Exchange (“ICE”) derivative transactions and the right of offset exists with these financial institutions under
master netting agreements. Accordingly, the fair value of the Partnership’s exchange-traded derivative instruments is presented on
a net basis in the consolidated balance sheets. Exposure on OTC derivatives is limited to the amount of the recorded fair value as
of the balance sheet dates.
Note 10. Fair Value Measurements
Recurring Fair Value Measures
Assets and liabilities are classified in the entirety based on the lowest level of input that is significant to the fair value
measurement. The Partnership’s assessment of the significance of a particular input to the fair value measurement requires
judgment and may affect the valuation of the fair value assets and liabilities and their placement within the fair value hierarchy
levels. The following tables present, by level within the fair value hierarchy, the Partnership’s financial
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
assets and liabilities that were measured at fair value on a recurring basis as of December 31, 2019 and 2018 (in thousands):
Assets:
Forward derivative contracts (1)
Exchange-traded/cleared derivative instruments (2)
Pension plans
Total assets
Liabilities:
Forward derivative contracts (1)
Assets:
Forward derivative contracts (1)
Exchange-traded/cleared derivative instruments (2)
Pension plans
Total assets
Liabilities:
Forward derivative contracts (1)
Fair Value at December 31, 2019
Level 1
Level 2
Level 3
Cash Collateral
Netting
Total
— $
1,453
17,099
18,552 $
4,002 $
—
—
4,002 $
562 $
—
—
562 $
— $
33,013
—
33,013 $
4,564
34,466
17,099
56,129
— $
(12,112) $
(586) $
— $
(12,698)
Fair Value at December 31, 2018
Level 1
Level 2
Level 3
Cash Collateral
Netting
Total
— $
83,617
15,800
99,417 $
25,504 $
—
—
25,504 $
886 $
—
—
886 $
— $
(68,851)
—
(68,851) $
26,390
14,766
15,800
56,956
— $
(3,878) $
(616) $
— $
(4,494)
$
$
$
$
$
$
(1) Forward derivative contracts include the Partnership’s petroleum and ethanol physical and financial forwards and OTC
swaps
(2) Amount includes the effect of cash balances on deposit with clearing brokers.
This table excludes cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair
value. The carrying amounts of certain of the Partnership’s financial instruments, including cash equivalents, accounts receivable,
accounts payable and other accrued liabilities approximate fair value due to their short maturities. The carrying value of the credit
facility approximates fair value due to the variable rate nature of these financial instruments.
The carrying value of the inventory qualifying for fair value hedge accounting approximates fair value due to
adjustments for changes in fair value of the hedged item. The fair values of the derivatives used by the Partnership are disclosed
in Note 9.
The determination of the fair values above incorporates factors including not only the credit standing of the
counterparties involved, but also the impact of the Partnership’s nonperformance risks on its liabilities.
The values of the Level 1 exchange-traded/cleared derivative instruments and pension plan assets were determined using
quoted prices in active markets for identical assets. Specifically, the fair values of the Level 1 exchange-traded/cleared derivative
instruments were based on quoted process obtained from the NYMEX, CME and ICE. The fair values of the Level 1 pension plan
assets were based on quoted prices for identical assets which primarily consisted of fixed income securities, equity securities and
cash and cash equivalents.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The values of the Level 2 derivative contracts were calculated using expected cash flow models and market approaches
based on observable market inputs, including published and quoted commodity pricing data, which is verified against other
available market data. Specifically, the fair values of the Level 2 derivative commodity contracts were derived from published
and quoted NYMEX, CME, ICE, New York Harbor and third-party pricing information for the underlying instruments using
market approaches. The fair value of the Level 2 interest rate instruments was derived from the implied forward LIBOR yield
curve for the sale period as the future interest rate swap settlements using expected cash flow models. The Partnership has not
changed its valuation techniques or Level 2 inputs during the years ended December 31, 2019 and 2018.
The Partnership estimates the fair values of its senior notes using a combination of quoted market prices for similar
financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered Level 2 inputs. The
fair values of the senior notes, estimated by observing market trading prices of the respective senior notes, were as follows at
December 31 (in thousands):
2019
2018
Face
Value
Fair
Value
Face
Value
Fair
Value
6.25% senior notes due 2022
7.00% senior notes due 2023
7.00% senior notes due 2027
Level 3 Information
— $
$
— $ 375,000 $ 363,750
$ 300,000 $ 309,000 $ 300,000 $ 294,000
—
$ 400,000 $ 423,000 $
— $
The values of the Level 3 derivative contracts were calculated using market approaches based on a combination of
observable and unobservable market inputs, including published and quoted NYMEX, CME, ICE, New York Harbor and third-
party pricing information for a component of the underlying instruments as well as internally developed assumptions where there
is little, if any, published or quoted prices or market activity. The unobservable inputs used in the measurement of the Level 3
derivative contracts include estimates for location basis, transportation and throughput costs net of an estimated margin for
current market participants. The estimates for these inputs for crude oil were ($4.95) to ($3.25) per barrel and ($3.25) to $2.00
per barrel as of December 31, 2019 and 2018, respectively. The estimates for these inputs for propane were $0.84 to $15.54 per
barrel and $0.84 to $10.50 per barrel as of December 31, 2019 and 2018, respectively. Gains and losses recognized in earnings (or
changes in net assets) are disclosed in Note 9.
Sensitivity of the fair value measurement to changes in the significant unobservable inputs is as follows:
Significant
Unobservable Input
Location basis
Location basis
Transportation
Transportation
Throughput costs
Throughput costs
Impact on Fair Value
Position Change to Input
Measurement
Long
Short
Long
Short
Long
Short
Increase (decrease)
Increase (decrease)
Increase (decrease)
Increase (decrease)
Increase (decrease)
Increase (decrease)
Gain (loss)
Loss (gain)
Gain (loss)
Loss (gain)
Gain (loss)
Loss (gain)
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents a reconciliation of changes in fair value of the Partnership’s derivative contracts classified
as Level 3 in the fair value hierarchy at December 31 (in thousands):
Fair value at December 31, 2018
Derivatives entered into during the period
Derivatives sold during the period
Realized gains (losses) recorded in cost of sales
Unrealized gains (losses) recorded in cost of sales
Fair value at December 31, 2019
$
$
270
502
(467)
(241)
(88)
(24)
The Partnership’s policy is to recognize transfers between levels with the fair value hierarchy as of the beginning of the
reporting period. The Partnership also excludes any activity for derivative instruments that were not classified as Level 3 at either
the beginning or end of the reporting period.
Non-Recurring Fair Value Measures
Certain nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value
adjustments in certain circumstances, such as acquired assets and liabilities, losses related to firm non-cancellable purchase
commitments or long-lived assets subject to impairment. For assets and liabilities measured on a non-recurring basis during the
year, accounting guidance requires quantitative disclosures about the fair value measurements separately for each major category.
See Note 2 for a discussion of the Partnership’s losses on impairment of assets, Note 7 for assets held for sale and Note 20 for
acquired assets and liabilities measured on a non-recurring basis.
Note 11. Commitments and Contingencies
The Partnership is subject to contingencies, including legal proceedings and claims arising out of the normal course of
business that cover a wide range of matters, including, among others, environmental matters and contract and employment claims.
Purchase Commitments
The Partnership has minimum retail gasoline volume purchase requirements with various unrelated parties. These
gallonage requirements are purchased at the fair market value of the product at the time of delivery. Should these gallonage
requirements not be achieved, the Partnership may be liable to pay penalties to the appropriate supplier. As of December 31,
2019, the Partnership has fulfilled all gallonage commitments. The following provides minimum volume purchase requirements
at December 31, 2019 (in thousands of gallons):
2020
2021
2022
2023
2024
Thereafter
Total
Brand Fee Agreement
418,738
351,900
231,300
187,200
177,400
142,100
1,508,638
The Partnership entered into a brand fee agreement with ExxonMobil Corporation (“ExxonMobil”) which entitles the
Partnership to operate retail gasoline stations under the Mobil‑branded trade name and related trade logos.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fees, which are based upon an estimate of the volume of gasoline and diesel to be sold at the gasoline stations acquired from
ExxonMobil in 2010, are due on a monthly basis. The following provides total future minimum payments under the agreement
with non‑cancellable terms of one year or more at December 31, 2019 (in thousands):
2020
2021
2022
2023
2024
Thereafter
Total
$
$
9,000
9,000
9,000
9,000
9,000
4,500
49,500
Total expenses reflected in cost of sales related to this agreement were approximately $9.0 million for each of the years
ended December 31, 2019, 2018 and 2017.
Other Commitments
In June 2014, the Partnership entered into a pipeline connection agreement with Meadowlark Midstream Company, LLC
(“Meadowlark”) whereby Meadowlark would construct, own, operate and maintain a crude oil pipeline from its Divide County,
North Dakota crude oil station to the Partnership’s Basin Transload crude oil storage facility in Columbus, North Dakota. In
connection with the agreement, the Partnership was committed to a minimum take-or-pay throughput commitment of
approximately $55.0 million over a seven–year period beginning after the commissioning of the pipeline which occurred in
December of 2015. At December 31, 2019, the remaining commitment on the take-or-pay commitment was approximately
$25.0 million.
In May 2014, the Partnership entered into a pipeline connection agreement with Tesoro High Plains Pipeline Company
(“Tesoro High Plains”) whereby Tesoro High Plains would design, engineer, construct and place in service improvements on its
pipeline system that will expand its capacity to ship crude oil from points in Dunn and McKenzie Counties, North Dakota to
Ramberg Station/Beaver Lodge destination point in Williams County, North Dakota. In connection with this agreement, the
Partnership was committed to a minimum take-or-pay throughput commitment of approximately $36.4 million over a seven–year
period beginning September 1, 2014. At December 31, 2019, the remaining commitment on the take-or-pay commitment,
including a quarterly take-or-pay of $1.5 million, was approximately $9.9 million.
In April 2014, Basin Transload, of which the Partnership owns a 60% membership interest, entered into a pipeline
connection agreement with Tesoro Logistics (“Tesoro”) whereby Tesoro would build, own and operate a four‑mile pipeline
lateral from its existing block gate valve in Mercer Country, North Dakota to the Partnership’s Beulah Rail Facility near Beulah,
North Dakota. In connection with this agreement, Basin Transload was committed to a minimum take-or-pay throughput
commitment of approximately $14.6 million over a five‑year period beginning after the commissioning of the pipeline, which
occurred in January 2015. During the third quarter of 2017, this agreement was accelerated by Tesoro due to a lack of crude oil
movement through the pipeline, and the Partnership recorded a $13.1 million expense. In October 2017, the Partnership paid
the $13.1 million to Tesoro associated with the acceleration and corresponding termination of this agreement. At December 31,
2019, the remaining commitment on the take-or-pay commitment was $0.
In February 2013, the Partnership assumed natural gas transportation and reservation agreements, which have various
expiration dates, with Northwest Natural Gas Company (“NW Natural Gas”) and the Northwest Pipeline system (“NW Pipeline”)
whereby NW Natural Gas and NW Pipeline provide the Partnership with the transportation and reservation of firm natural gas
delivered to the Partnership’s Oregon facility. At December 31, 2019, the remaining commitment on the transportation and
reservation agreements over the next five years was approximately $6.1 million.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In February 2013, the Partnership assumed access right agreements with the Port of Columbia County (formerly known
as Port of St. Helens) for access rights to the rail spur and dock located at the Partnership’s Oregon facility. The total expense
under these agreements amounted to approximately $0.9 million, $0.9 million and $1.0 million for the years ended December 31,
2019, 2018 and 2017, respectively. At December 31, 2019, the remaining ratable commitment on these access right agreements,
with expirations through 2066, was approximately $27.1 million.
Operating Leases
Please see Note 3 for a discussion of the Partnership’s operating lease obligations related to leases for office space and
computer equipment, land, gasoline stations, railcars and barges.
Environmental Liabilities
Please see Note 14 for a discussion of the Partnership’s environmental liabilities.
Legal Proceedings
Please see Note 23 for a discussion of the Partnership’s legal proceedings.
Note 12. Trustee Taxes and Accrued Expenses and Other Current Liabilities
Trustee Taxes
The Partnership had trustee taxes payable of $42.9 million and $42.6 million in various pass‑through taxes collected on
behalf of taxing authorities at December 31, 2019 and 2018, respectively.
Volumetric Ethanol Excise Tax Credit—In the first quarter of 2018, the Partnership recognized a one-time income item
of approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise
Tax Credit, which tax credit program expired in 2011. See Note 2 for additional information.
Loss on Trustee Taxes—The Partnership recognized a loss on trustee taxes of $16.2 million for the year ended
December 31, 2017 related to an administratively closed New York State tax audit of the Partnership’s fuel and sales tax returns
for the periods between December 2008 through August 2013. See Note 2 for additional information.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following at December 31 (in thousands):
Barging transportation, product storage and other ancillary cost accruals
Employee compensation
Accrued interest
Other
Total
$
$
2019
2018
35,098 $
28,150
12,849
26,705
102,802 $
39,379
30,261
12,049
35,585
117,274
Employee compensation consisted of bonuses, vacation and other salary accruals. Ancillary costs consisted of cost
accruals related to product expediting and storage.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 13 Income Taxes
GMG, a wholly owned subsidiary of the Partnership, is a taxable entity for federal and state income tax purposes.
Current and deferred income taxes are recognized on the separate earnings of GMG, and the after‑tax earnings of GMG are
included in the consolidated earnings of the Partnership.
The following table presents a reconciliation of the difference between the statutory federal income tax rate and the
effective income tax rate for the years ended December 31:
Federal statutory income tax rate
State income tax rate, net of federal tax benefit
Derecognition of goodwill
Federal deferred rate change
Partnership income not subject to tax
Effective income tax rate
2019
2018
2017
21.0 %
2.9 %
0.5 %
— %
(21.4) %
3.0 %
21.0 %
2.8 %
0.3 %
— %
(18.9) %
5.2 %
35.0 %
1.2 %
1.6 %
(65.5)%
(42.5)%
(70.2)%
The following table presents the components of the provision for income taxes for the years ended December 31 (in
thousands):
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Total deferred
Total
2019
2018
2017
$
$
35
1,036
—
1,071
815
(792)
23
1,094
$
$
162
2,706
4
2,872
1,961
790
2,751
5,623
$
$
1,371
1,011
4
2,386
(25,217)
(732)
(25,949)
(23,563)
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Significant components of long‑term deferred taxes were as follows at December 31 (in thousands):
Deferred Income Tax Assets
Accounts receivable allowances
Environmental liability
Asset retirement obligation
Deferred financing obligation
UNICAP
Lease liability
Other
Federal net operating loss carryforwards
State net operating loss carryforwards
Tax credit carryforward
Total deferred tax assets, gross
Valuation allowance
Total deferred tax assets, net
Deferred Income Tax Liabilities
Property and equipment
Land
Other deferred tax liabilities
Right of use assets
Intangible assets
Total deferred tax liabilities
Net deferred tax liabilities
2019
2018
$
$
$
$
$
751
9,414
2,146
11,394
8
44,578
1,471
18,505
1,134
691
90,092
(3,299)
86,793
(74,031)
(12,353)
(748)
(42,536)
(4)
(129,672)
(42,879)
$
$
$
$
$
760
9,943
2,344
11,405
56
—
1,384
14,811
1,087
284
42,074
(3,138)
38,936
(69,356)
(12,189)
—
—
(247)
(81,792)
(42,856)
The Partnership’s net deferred tax liabilities are primarily comprised of the differences in the historical tax basis and fair
value book basis of property, equipment and land that were acquired in connection with the 2015 acquisition of Warren
Equities, Inc. (“Warren”).
At December 31, 2019, GMG had federal and state net operating loss carryforwards of approximately $8.9 million and
$18.9 million, respectively, which will begin to expire in 2034 and 2026, respectively. In addition, GMG had federal and state net
operating loss carryforwards of approximately $66.8 and $0.2 million, respectively, which can be carried forward indefinitely.
Utilization of the net operating loss carryforwards may be subject to annual limitations due to the ownership percentage change
limitations provided by the Internal Revenue Code Section 382 and similar state provisions. In the event of a deemed change in
control under Internal Revenue Code Section 382, an annual limitation imposed on the utilization of net operating losses may
result in the expiration of all or a portion of the net operating loss carryforwards.
At December 31, 2019, the Partnership had $30.5 million of net deferred tax liabilities (consisting of the $42.9 million
total net deferred tax liability less the $12.4 million deferred tax liability relating to land discussed below) relating to property and
equipment, net operating loss carryforwards, tax credit carryforwards and other temporary differences, certain of which are
available to reduce income taxes in future years. The Partnership recognizes deferred tax assets to the extent that the
recoverability of these assets satisfies the “more likely than not” criteria in accordance with the FASB’s guidance regarding
income taxes. A valuation allowance must be established when it is “more likely than not” that all or a portion of deferred tax
assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s
performance, the market environment in which the company operates, length of carryback and carryforward periods and
projections of future operating results. The Partnership concluded, based on an evaluation of future operating results and reversal
of existing taxable temporary differences, that a portion of these assets will not be realized in a future period. The valuation
allowance increased by approximately
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$0.2 million as of December 31, 2019.
At December 31, 2019, the Partnership also had a $12.4 million deferred tax liability relating to land. Land is an asset
with an indefinite useful life and would not ordinarily serve as a source of income for the realization of deferred tax assets. This
deferred tax liability will not reverse until some indefinite future period when the asset is either sold or written down due to
impairment. Such taxable temporary differences generally cannot be used as a source of taxable income to support the realization
of deferred tax assets relating to reversing deductible temporary differences, including loss carryforwards with expiration periods.
It can be used as a source of income to benefit other indefinite lived assets.
The following presents a reconciliation of the differences between income before income tax (expense) benefit and
(loss) income subject to income tax expense for the years ended December 31 (in thousands):
Income before income tax (expense) benefit
Less non—taxable income
(Loss) income subject to income tax expense
$
$
2019
2018
2017
36,272
37,001
(729)
$
$
108,026
97,561
10,465
$
$
33,554
40,904
(7,350)
The Partnership made approximately ($5.2 million), $0.7 million and $7.4 million in income tax payments, net of
refunds received, during 2019, 2018 and 2017, respectively. The ($5.2 million) in 2019 consists of tax refunds of ($7.6 million)
received associated with the Warren amended returns for periods prior to the acquisition of Warren on January 27, 2015 and
($0.2 million) of other tax refunds, offset by $2.6 million in income tax payments. In accordance with the stock purchase
agreement between the Partnership and Warren, the Partnership is ultimately not responsible for federal income tax obligations
for tax periods prior to and through January 6, 2015. Any tax obligations will be funded by the selling shareholders, and any tax
refunds will be remitted to the selling shareholders.
GMG files income tax returns in the United States and various state jurisdictions. With few exceptions, the Partnership
is subject to income tax examinations by tax authorities for all years dated back to 2016.
The following presents the changes in gross unrealized tax benefits for the years ended December 31 (in thousands):
Balance at beginning of year
Increases for tax positions taken in prior years
Settlements of tax positions taken in prior years
Income subject to income tax expense
$
$
2019
2018
2017
994
—
—
994
$
$
994
—
—
994
$
$
1,433
28
(467)
994
Unrecognized tax benefits represent uncertain tax positions for which reserves have been established. The Partnership
had gross-tax effected unrecognized tax benefits of $1.0 million for each of the years ended December 31, 2019, 2018 and 2017,
all of which would favorably impact the effective tax rate if recognized.
The FASB’s accounting guidance for income taxes clarifies the accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement of a tax position taken or
expected to be taken in a tax return. The Partnership performed an evaluation of all material tax positions for the tax years that
remain subject to examination by major tax jurisdictions as of December 31, 2019 (tax years ended December 31, 2019, 2018 and
2017). Tax positions that do not meet the more-likely-than-not recognition threshold at the financial statement date may not be
recognized or continue to be recognized under the accounting guidance for income taxes. The Partnership classifies interest and
penalties related to income taxes as components of its provision for income taxes. The amount of interest and penalties recorded
in the accompanying statements of operations was $0.1 million, $0.1 million and $0 for the years ended December 31, 2019, 2018
and 2017, respectively. The amount
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of interest and penalties recorded in the accompanying consolidated balance sheets was $0.2 million as of both December 31,
2019 and 2018. The Partnership anticipates that the liability for unrecognized tax benefits for uncertain tax positions could change
by up to $1.0 million in the next twelve months as a result of closure of various statutes of limitations.
Note 14. Environmental Liabilities and Renewable Identification Numbers (RINs)
Environmental Liabilities
The Partnership owns or leases properties where refined petroleum products, gasoline blendstocks, renewable fuels and
crude oil are being or may have been handled. These properties and the refined petroleum products, gasoline blendstocks,
renewable fuels and crude oil handled thereon may be subject to federal and state environmental laws and regulations. Under such
laws and regulations, the Partnership could be required to remove or remediate containerized hazardous liquids or associated
generated wastes (including wastes disposed of or abandoned by prior owners or operators), to clean up contaminated property
arising from the release of liquids, pollutants or wastes into the environment, including contaminated groundwater, or to
implement best management practices to prevent future contamination.
The Partnership maintains insurance of various types with varying levels of coverage that it considers adequate under the
circumstances to cover its operations and properties. The insurance policies are subject to deductibles that the Partnership
considers reasonable and not excessive. In addition, the Partnership has entered into indemnification agreements with various
sellers in conjunction with several of its acquisitions. Certain environmental remediation obligations at several acquired retail
gasoline station assets from Capitol in June 2015 and Alliance Energy LLC (“Alliance”) in March 2012 are being funded by third
parties who assumed certain liabilities in connection with Capitol’s acquisition of these assets from ExxonMobil in 2009 and
2010 and Alliance’s acquisition of these assets from ExxonMobil in 2011 and, therefore, cost estimates for such obligations at
these stations are not included in this estimate of liability to the Partnership. Allocation of a known environmental liability is an
issue negotiated in connection with each of the Partnership’s acquisition transactions. In each case, the Partnership makes an
assessment of potential environmental liability exposure based on available information. Based on that assessment and relevant
economic and risk factors, the Partnership determines whether to, and the extent to which it will, assume liability for existing
environmental conditions.
The following table presents a summary roll forward of the Partnership’s environmental liabilities, which were recorded
on an undiscounted basis, at December 31, 2019 (in thousands):
Environmental Liability Related to:
Retail gasoline stations
Terminals
Total environmental liabilities
Current portion
Long-term portion
Total environmental liabilities
Balance at
December 31,
2018
Payments
2019
Dispositions
Adjustments
2019
2019
Other
Balance at
December 31,
2019
(3,129) $
(313)
(3,442) $
(1,425) $
—
(1,425) $
$
$
$
$
59,133 $
4,091
63,224 $
6,092
57,132
63,224
914 $
—
914 $
$
$
55,493
3,778
59,271
5,009
54,262
59,271
In addition to environmental liabilities related to the Partnership’s retail gasoline stations, the Partnership retains some of
the environmental obligations associated with certain gasoline stations that the Partnership has sold.
The Partnership’s estimates used in these environmental liabilities are based on all known facts at the time and its
assessment of the ultimate remedial action outcomes. Among the many uncertainties that impact the Partnership’s
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
estimates are the necessary regulatory approvals for, and potential modification of, its remediation plans, the amount of data
available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental
remediation services and equipment, relief of obligations through divestitures of sites and the possibility of existing legal claims
giving rise to additional claims. Dispositions generally represent relief of legal obligations through the sale of the related property
with no retained obligation. Other adjustments generally represent changes in estimates for existing obligations or obligations
associated with new sites. Therefore, although the Partnership believes that these environmental liabilities are adequate, no
assurances can be made that any costs incurred in excess of these environmental liabilities or outside of indemnifications or not
otherwise covered by insurance would not have a material adverse effect on the Partnership’s financial condition, results of
operations or cash flows.
Renewable Identification Numbers (RINs)
A RIN is a serial number assigned to a batch of renewable fuel for the purpose of tracking its production, use, and
trading as required by the U.S. Environmental Protection Agency’s (“EPA”) Renewable Fuel Standard that originated with the
Energy Policy Act of 2005 and modified by the Energy Independence and Security Act of 2007. To evidence that the required
volume of renewable fuel is blended with gasoline and diesel motor vehicle fuels, obligated parties must retire sufficient RINs to
cover their Renewable Volume Obligation (“RVO”). The Partnership’s EPA obligations relative to renewable fuel reporting are
comprised of foreign gasoline and diesel that the Partnership may import and blending operations at certain facilities. As a
wholesaler of transportation fuels through its terminals, the Partnership separates RINs from renewable fuel through blending
with gasoline and can use those separated RINs to settle its RVO. While the annual compliance period for the RVO is a calendar
year and the settlement of the RVO typically occurs by March 31 of the following year, the settlement of the RVO can occur,
under certain EPA deferral actions, more than one year after the close of the compliance period.
The Partnership’s Wholesale segment’s operating results may be sensitive to the timing associated with its RIN position
relative to its RVO at a point in time, and the Partnership may recognize a mark‑to‑market liability for a shortfall in RINs at the
end of each reporting period. To the extent that the Partnership does not have a sufficient number of RINs to satisfy the RVO as
of the balance sheet date, the Partnership charges cost of sales for such deficiency based on the market price of the RINs as of the
balance sheet date and records a liability representing the Partnership’s obligation to purchase RINs. The Partnership’s RVO
deficiency was $0.9 million and $0.6 million at December 31, 2019 and 2018, respectively.
The Partnership may enter into RIN forward purchase and sales commitments. Total losses from firm non-cancellable
commitments were immaterial at both December 31, 2019 and 2018.
Note 15. Employee Benefit Plans
The Partnership sponsors and maintains the Global Partners LP 401(k) Savings and Profit Sharing Plan (the “Global
401(k) Plan”), a qualified defined contribution plan. Eligible employees may elect to contribute up to 100% of their eligible
compensation to the Global 401(k) Plan for each payroll period, subject to annual dollar limitations which are periodically
adjusted by the IRS. The General Partner makes safe harbor matching contributions to the Global Partners 401(k) Plan equal to
100% of the participant’s elective contributions that do not exceed 3% of the participant’s eligible compensation and 50% of the
participant’s elective contributions that exceed 3% but do not exceed 5% of the participant’s eligible compensation. The General
Partner also makes discretionary non‑matching contributions for certain groups of employees in amounts up to 2% of eligible
compensation. Profit‑sharing contributions may also be made at the sole discretion of the General Partner’s board of directors.
GMG sponsors and maintains the Global Montello Group Corp. 401(k) Savings and Profit Sharing Plan (the “GMG
401(k) Plan”), a qualified defined contribution plan. Eligible employees may elect to contribute up to 100% of their eligible
compensation to the GMG 401(k) Savings and Profit Sharing Plan for each payroll period, subject to annual
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
dollar limitations which are periodically adjusted by the IRS. GMG makes safe harbor matching contributions to the 401(k)
Savings and Profit Sharing Plan equal to 100% of the participant’s elective contributions that do not exceed 3% of the
participant’s eligible compensation and 50% of the participant’s elective contributions that exceed 3% but do not exceed 5% of
the participant’s eligible compensation. Profit‑sharing contributions may also be made at the sole discretion of GMG’s board of
directors.
The Global 401(k) Plan and the GMG 401(k) Plan collectively had expenses of approximately $3.5 million, $3.1 million
and $3.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.
In addition, the General Partner sponsors and maintains the Global Partners LP Pension Plan (the “Global Pension
Plan),” and GMG sponsors and maintains the Global Montello Group Corp. Pension Plan (the “GMG Pension Plan”), each being
a qualified defined benefit pension plan. The Global Pension Plan and the GMG Pension Plan were amended to freeze
participation and benefit accruals effective in 2009 and 2012, respectively.
The following table presents each plan’s funded status and the total amounts recognized in the consolidated balance
sheets at December 31 (in thousands):
Projected benefit obligation
Fair value of plan assets
Net unfunded pension liability
Projected benefit obligation
Fair value of plan assets
Net unfunded pension liability
Global
Pension Plan
December 31, 2019
GMG
Pension Plan
17,030
14,267
2,763
$
$
4,459
2,832
1,627
Global
Pension Plan
December 31, 2018
GMG
Pension Plan
16,213
13,372
2,841
$
$
3,873
2,428
1,445
$
$
$
$
$
$
$
$
Total
21,489
17,099
4,390
Total
20,086
15,800
4,286
Total actual return on plan assets was $3.9 million and ($0.7 million) in 2019 and 2018, respectively.
The following presents the components of the net periodic change in benefit obligation for the Pension Plans for the
years ended December 31 (in thousands):
Benefit obligation at beginning of year
Interest cost
Actuarial (gain) loss
Benefits paid
Benefit obligation at end of year
2019
2018
2017
$
$
20,086 $
767
3,839
(3,203)
21,489 $
22,217 $
714
(1,347)
(1,498)
20,086 $
20,631
724
2,392
(1,530)
22,217
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following presents the weighted-average actuarial assumptions used in determining each plan’s annual pension
expense for the years ended December 31:
Discount rate
Expected return on plan assets
Global Pension Plan
2019 2018 2017
3.0% 4.1% 3.4%
7.0% 7.0% 7.0%
GMG Pension Plan
2018
4.2%
7.0%
2019
3.2%
7.0%
2017
3.6%
7.0%
The discount rates were selected by performing a cash flow/bond matching analysis based on the FTSE Above Median
Double-A Pension Discount Curve for December 2019. The discount rates for 2019 include updated mortality assumptions to
reflect the most recently available mortality improvement scale released by the Society of Actuaries. The expected long-term rate
of return on plan assets is determined by using each plan’s respective target allocation and historical returns for each asset class.
The fundamental investment objective of each of the Pension Plans is to provide a rate of return sufficient to fund the
retirement benefits under the applicable Pension Plan at a reasonable cost to the applicable plan sponsor. At a minimum, the rate
of return should equal or exceed the discount rate assumed by the Pension Plan’s actuaries in projecting the funding cost of the
Pension Plan under the applicable Employee Retirement Income Security Act (“ERISA”) standards. To do so, the General
Partner’s Pension Committee may appoint one or more investment managers to invest all or portions of the assets of the Pension
Plans in accordance with specific investment guidelines, objectives, standards and benchmarks.
The following presents the Pension Plans’ benefits as of December 31, 2019 expected to be paid in each of the next five
fiscal years and in the aggregate for the next five fiscal years thereafter (in thousands):
2020
2021
2022
2023
2024
2025—2029
Total
$
$
1,647
1,072
1,281
920
942
7,782
13,644
The cost of annual contributions to the Pension Plans is not significant to the General Partner, the Partnership or its
subsidiaries. Total contributions made by the General Partner, the Partnership and its subsidiaries to the Pension Plans were
approximately $0.6 million, $0.4 million and $0.4 million in 2019, 2018 and 2017, respectively.
Note 16. Related‑‑Party Transactions
The Partnership is a party to a Second Amended and Restated Services Agreement with Global Petroleum Corp.
(“GPC”), an affiliate of the Partnership that is 100% owned by members of the Slifka family, pursuant to which the Partnership
provides GPC with certain tax, accounting, treasury, legal, information technology, human resources and financial operations
support services for which GPC pays the Partnership a monthly services fee at an agreed amount subject to the approval by the
Conflicts Committee of the board of directors of the General Partner. The Second Amended and Restated Services Agreement is
for an indefinite term and any party may terminate some or all of the services upon ninety (90) days’ advanced written notice. As
of December 31, 2019, no such notice of termination was given by GPC or the Partnership.
The General Partner employs substantially all of the Partnership’s employees, except for most of its gasoline station and
convenience store employees, who are employed by GMG. The Partnership reimburses the General Partner
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
for expenses incurred in connection with these employees. These expenses, including bonus, payroll and payroll taxes, were
$118.5 million, $104.8 million and $106.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. The
Partnership also reimburses the General Partner for its contributions under the General Partner’s 401(k) Savings and Profit
Sharing Plans (see Note 15) and the General Partner’s qualified and non‑qualified pension plans.
The table below presents receivables from GPC and the General Partner at December 31 (in thousands):
Receivables from GPC
Receivables from the General Partner (1)
Total
2019
2018
$
$
53 $
7,770
7,823 $
23
5,412
5,435
(1) Receivables from the General Partner reflect the Partnership’s prepayment of payroll taxes and payroll accruals to the
General Partner and are due to the timing of the payroll obligations.
In addition, for the years ended December 31, 2019, 2018 and 2017, the Partnership paid certain costs in connection with
a compensation funding agreement with the General Partner. See Note 17, “Long-Term Incentive Plan–Repurchase Program.”
Note 17. Long-Term Incentive Plans
The Partnership has a Long Term Incentive Plan, as amended (the “LTIP”), whereby a total of 4,300,000 common units
were authorized for delivery with respect to awards under the LTIP. The LTIP provides for awards to employees, consultants and
directors of the General Partner and employees and consultants of affiliates of the Partnership who perform services for the
Partnership. The LTIP allows for the award of options, unit appreciation rights, restricted units, phantom units, distribution
equivalent rights, unit awards and substitute awards. Awards granted pursuant to the LTIP vest pursuant to the terms of the grant
agreements. A total of 3,016,234 units were available for issuance under the LTIP as of December 31, 2019.
Awards granted under the LTIP are authorized by the Compensation Committee of the board of directors of the General
Partner (the “Committee”) from time to time. Additionally, and in accordance with the LTIP, the Committee established a “CEO
Authorized LTIP” program pursuant to which the Chief Executive Officer (“CEO”) could grant awards of phantom units without
distribution equivalent rights to employees of the General Partner and the Partnership’s subsidiaries, other than named executive
officers. The CEO Authorized LTIP program was approved for three consecutive calendar years and expired on December 31,
2017. During each calendar year of the program, the CEO was authorized to grant awards of up to an aggregate amount of
$2.0 million of phantom units payable in common units upon vesting, with unused dollar amounts carrying over in the next year,
and no individual grant could be made for an award valued at the time of grant of more than $550,000, unless otherwise
previously approved by the Committee. Awards granted pursuant to the CEO Authorized LTIP generally were for a term of six
years and vest in equal tranches at the end of each of the fourth, fifth and sixth anniversary dates of the particular award.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table presents a summary of the non‑vested phantom units granted under the LTIP:
Outstanding non—vested units at December 31, 2017
Vested
Forfeited
Outstanding non—vested phantom units at December 31, 2018
Vested
Forfeited
Outstanding non—vested phantom units at December 31, 2019
Number of
Non-vested
Units
Weighted
Average
Grant Date
Fair Value ($)
912,564
(153,966)
(28,457)
730,141
(148,842)
(18,393)
562,906
15.99
27.93
13.40
13.57
27.41
18.66
9.74
Accounting guidance for share‑based compensation requires that a non‑vested equity share unit awarded to an employee
is to be measured at its fair value as if it were vested and issued on the grant date.
Compensation cost for an award of share-based employee compensation classified as equity is recognized over the
requisite service period. The requisite service period for the Partnership is from the grant date through the vesting dates described
in the grant agreement. The Partnership recognizes as compensation expense for the awards granted to employees and non-
employee directors the value of the portion of the award that is ultimately expected to vest over the requisite service period on a
straight-line basis. The Partnership recognizes forfeitures as they occur.
The Partnership recorded total compensation expense related to the outstanding LTIP awards of $2.0 million,
$3.1 million and $3.9 million for the years ended December 31, 2019, 2018 and 2017, respectively, which is included in selling,
general and administrative expenses in the accompanying consolidated statements of operations.
The total compensation cost related to the non-vested awards not yet recognized at December 31, 2019 was
approximately $2.7 million and is expected to be recognized ratably over the remaining requisite service periods.
Repurchase Program
In May 2009, the board of directors of the General Partner authorized the repurchase of the Partnership’s common units
(the “Repurchase Program”) for the purpose of meeting the General Partner’s anticipated obligations to deliver common units
under the LTIP and meeting the General Partner’s obligations under existing employment agreements and other employment
related obligations of the General Partner (collectively, the “General Partner’s Obligations”). The General Partner is authorized to
acquire up to 1,242,427 of its common units in the aggregate over an extended period of time, consistent with the General
Partner’s Obligations. Common units may be repurchased from time to time in open market transactions, including block
purchases, or in privately negotiated transactions. Such authorized unit repurchases may be modified, suspended or terminated at
any time and are subject to price and economic and market conditions, applicable legal requirements and available liquidity. Since
the Repurchase Program was implemented, the General Partner repurchased 838,505 common units pursuant to the Repurchase
Program for approximately $24.8 million, none of which were repurchased in 2019.
In June 2009, the Partnership and the General Partner entered into the Global GP LLC Compensation Funding
Agreement (the “Agreement”) whereby the Partnership and the General Partner established obligations and protocol for (i) the
funding, management and administration of a compensation funding account and underlying General Partner’s Obligations, and
(ii) the holding and disposition by the General Partner of common units acquired in accordance with the Agreement for such
purposes as otherwise set forth in the Agreement. The Agreement requires the Partnership to fund costs that the General Partner
incurs in connection with performance of the Agreement. In accordance with the
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Agreement, the Partnership paid members of the General Partner approximately $0.3 million and $0.4 million of these costs for
the years ended December 31, 2019 and 2018, respectively.
Note 18. Partners’ Equity, Allocations and Cash Distributions
Partners’ Equity
Common Units and General Partner Units
At December 31, 2019 there were 33,995,563 common units issued, including 7,402,198 common units held by affiliates
of the General Partner, including directors and executive officers, collectively representing a 99.33% limited partner interest in
the Partnership, and 230,303 general partner units representing a 0.67% general partner interest in the Partnership. There have
been no changes to common units or the general partner interest during the years ended December 31, 2019, 2018 and 2017.
Series A Preferred Units
On August 7, 2018, the Partnership issued 2,760,000 9.75% Series A Fixed-to-Floating Rate Cumulative Redeemable
Perpetual Preferred Units representing limited partner interests (the “Series A Preferred Units”) for $25.00 per Series A Preferred
Unit. The Partnership used the proceeds, net of underwriting discount and expenses, of $66.4 million to reduce indebtedness
under its Credit Agreement. There have been no changes to the Series A Preferred Units during the year ended December 31,
2019.
Common Units
The common units have limited voting rights as set forth in the Partnership’s partnership agreement.
General Partner Units and Incentive Distribution Rights
The Partnership’s general partner interest is represented by general partner units. The General Partner is entitled to a
percentage (equal to the general partner interest) of all cash distributions of available cash on all common units. The Partnership’s
partnership agreement sets forth the calculation to be used to determine the amount and priority of cash distributions that the
common unitholders, holders of the incentive distribution rights and the General Partner will receive. The Partnership’s general
partner interest has the management rights as set forth in the Partnership’s partnership agreement.
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available
cash from distributable cash flow after the target distribution levels have been achieved, as defined in the Partnership’s
partnership agreement. The General Partner holds all of the incentive distribution rights, but may transfer these rights separately
from its general partner interest, subject to restrictions in the Partnership’s partnership agreement.
Series A Preferred Units
The Series A Preferred Units is a class of equity security that ranks senior to the common units, the incentive distribution
rights and each other class or series of the Partnership’s equity securities established after August 7, 2018, the original issue date
of the Series A Preferred Units (the “Original Issue Date”), that is not expressly made senior to or on parity with the Series A
Preferred Units as to the payment of distributions and amounts payable on a liquidation event.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Allocations of Net Income
Net income is allocated between the General Partner and the common unitholders in accordance with the provisions of
the Partnership’s partnership agreement. Net income is generally allocated first to the General Partner and the common
unitholders in an amount equal to the net losses allocated to the General Partner and the common unitholders in the current and
prior tax years under the Partnership’s partnership agreement. The remaining net income is allocated to the General Partner and
the common unitholders in accordance with their respective percentage interests of the general partner units and common units.
Cash Distributions
Common Units
The Partnership intends to make cash distributions to common unitholders on a quarterly basis, although there is no
assurance as to the future cash distributions since they are dependent upon future earnings, capital requirements, financial
condition and other factors. The Credit Agreement prohibits the Partnership from making cash distributions if any potential
default or Event of Default, as defined in the Credit Agreement, occurs or would result from the cash distribution. The indentures
governing the Partnership’s outstanding senior notes also limit the Partnership’s ability to make distributions to its common
unitholders in certain circumstances.
Within 45 days after the end of each quarter, the Partnership will distribute all of its Available Cash (as defined in its
partnership agreement) to common unitholders of record on the applicable record date. The amount of Available Cash is all cash
on hand on the date of determination of Available Cash for the quarter; less the amount of cash reserves established by the
General Partner to provide for the proper conduct of the Partnership’s businesses, to comply with applicable law, any of the
Partnership’s debt instruments or other agreements or to provide funds for distributions to unitholders and the General Partner for
any one or more of the next four quarters.
The Partnership will make distributions of Available Cash from distributable cash flow for any quarter in the following
manner: 99.33% to the common unitholders, pro rata, and 0.67% to the General Partner, until the Partnership distributes for each
outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and thereafter, cash in excess of
the minimum quarterly distribution is distributed to the common unitholders and the General Partner based on the percentages as
provided below.
As holder of the IDRs, the General Partner is entitled to incentive distributions if the amount that the Partnership
distributes with respect to any quarter exceeds specified target levels shown below:
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Total Quarterly Distribution
Target Amount
up to $0.4625
above $0.4625 up to $0.5375
above $0.5375 up to $0.6625
above $0.6625
Marginal Percentage
Interest in Distributions
Unitholders General Partner
0.67 %
13.67 %
23.67 %
48.67 %
99.33 %
86.33 %
76.33 %
51.33 %
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Partnership paid the following cash distributions to common unitholders during 2019, 2018 and 2017 (in thousands,
except per unit data):
Cash Distribution
Payment Date
2017
2/14/2017
5/15/2017
8/14/2017
11/14/2017
2018
2/14/2018
5/15/2018
8/14/2018 (1)
11/14/2018 (1)
2019
2/14/2019 (1)
5/15/2019 (1)
8/14/2019 (1)
11/14/2019 (1)
Earned for the
Quarter
Ended
Per Unit
Cash
Distribution
Common
Units
General
Partner
Incentive
Distribution
Total Cash
Distribution
12/31/16
03/31/17
06/30/17
09/30/17
12/31/17
03/31/18
06/30/18
09/30/18
12/31/18
03/31/19
06/30/19
09/30/19
$ 0.4625 $ 15,723 $
0.4625
0.4625
0.4625
15,723
15,723
15,723
$ 0.4625 $ 15,723 $
0.4625
0.4750
0.4750
15,723
16,149
16,149
$ 0.5000 $ 16,998 $
0.5100
0.5150
0.5200
17,338
17,508
17,678
106 $
106
106
106
106 $
106
109
109
115 $
117
118
119
— $
—
—
—
— $
—
67
67
202 $
256
269
294
15,829
15,829
15,829
15,829
15,829
15,829
16,325
16,325
17,315
17,711
17,895
18,091
(1) This distribution resulted in the Partnership reaching its second target level distribution for the respective quarter. As a result,
the General Partner, as the holder of the IDRs, received an incentive distribution.
In addition, on January 27, 2020, the board of directors of the General Partner declared a quarterly cash distribution of
$0.5250 per unit ($2.10 per unit on an annualized basis) on all of its outstanding common units for the period from October 1,
2019 through December 31, 2019 to the Partnership’s common unitholders of record as of the close of business February 10,
2020. On February 14, 2020, the Partnership paid the total cash distribution of approximately $18.3 million.
Series A Preferred Units
Distributions on the Series A Preferred Units are cumulative from the Original Issue Date and payable quarterly in
arrears on February 15, May 15, August 15 and November 15 of each year, commencing on November 15, 2018 (each, a
“Distribution Payment Date”), to holders of record as of the opening of business on the February 1, May 1, August 1 or
November 1 next preceding the Distribution Payment Date, in each case, when, as, and if declared by the General Partner out of
legally available funds for such purpose. Distributions on the Series A Preferred Units will be paid out of Available Cash with
respect to the quarter immediately preceding the applicable Distribution Payment Date.
On November 15, 2018, the Partnership paid the initial quarterly cash distribution of $0.6635 per unit on the Series A
Preferred Units, covering the period from the Original Issue Date through November 14, 2018, totaling $1.8 million. The initial
distribution rate for the Series A Preferred Units from and including the Original Issue Date, but excluding, August 15, 2023 is
9.75% per annum of the $25.00 liquidation preference per Series A Preferred Unit (equal to $2.4375 per Series A Preferred Unit
per annum). On and after August 15, 2023, distributions on the Series A Preferred Units will accumulate for each distribution
period at a percentage of the $25.00 liquidation preference equal to an annual floating rate of the three-month LIBOR plus a
spread of 6.774% per annum.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Partnership paid the following cash distributions on the Series A Preferred Units during 2019 (in thousands, except per
unit data):
Cash Distribution
Payment Date
2/15/2019
5/15/2019
8/15/2019
11/15/2019
Earned for the
Quarterly Period
Covering
11/15/18 - 2/14/19
2/15/19 - 5/14/19
5/15/19 - 8/14/19
8/15/19 - 11/14/19
Per Unit
Cash
Distribution
Total Cash
Distribution
$
$
0.609375
0.609375
0.609375
0.609375
1,682
1,682
1,682
1,682
In addition, on January 21, 2020, the board of directors of the General Partner declared a quarterly cash distribution of
$0.609375 per unit ($2.4375 per unit on an annualized basis) on the Series A Preferred Units for the period from November 15,
2019 through February 14, 2020 to the Partnership’s preferred unitholders of record as of the opening of business on February 3,
2020. On February 18, 2020, the Partnership paid the total cash distribution of approximately $1.7 million.
Note 19. Unitholders’ Equity
At-the-Market Offering Program
On May 19, 2015, the Partnership entered into an equity distribution agreement pursuant to which the Partnership may
sell from time to time through its sales agents, following a standard due diligence effort, the Partnership’s common units having
an aggregate offering price of up to $50.0 million.
No common units have been sold by the Partnership pursuant to the at-the-market offering program since inception.
Note 20. Business Combinations
2018 Acquisitions
Acquisition from Cheshire Oil Company, LLC—On July 24, 2018, the Partnership acquired the assets of ten company-
operated gasoline stations and convenience stores from Cheshire in a cash transaction. The portfolio consists of nine stores in
New Hampshire and one in Brattleboro, Vermont. All of the locations are branded T-Bird Mini Marts and market Citgo fuel. The
purchase price was approximately $33.4 million, including inventory. The acquisition was financed with borrowings under the
Partnership’s revolving credit facility.
The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance
regarding business combinations. The Partnership’s financial statements include the results of operations of Cheshire subsequent
to the acquisition date.
In connection with the acquisition of Cheshire, the Partnership incurred acquisition costs of approximately $0.4 million
for the year ended December 31, 2018, which are included in selling, general and administrative expenses in the accompanying
consolidated statements of operations.
Acquisition from Champlain Oil Company, Inc.—On July 17, 2018, the Partnership acquired retail fuel and
convenience store assets from Champlain in a cash transaction. The acquisition included 37 company-operated gasoline stations
with Jiffy Mart-branded convenience stores in Vermont and New Hampshire and approximately 24 fuel sites that were either
owned or leased, including lessee dealer and commission agent locations. The transaction also included fuel
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
supply agreements for approximately 65 gasoline stations, primarily in Vermont and New Hampshire. The stations primarily
market major fuel brands such as Mobil, Shell, Citgo, Sunoco and Irving. The purchase price was approximately $138.2 million,
including inventory. The acquisition was financed with borrowings under the Partnership’s revolving credit facility.
The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance
regarding business combinations. The Partnership’s financial statements include the results of operations of Champlain
subsequent to the acquisition date.
The following table presents the final allocation of the purchase price to the estimated fair value of the assets acquired
and liabilities assumed at the date of acquisition (in thousands):
Assets purchased:
Inventory
Prepaid expenses and other current assets
Property and equipment
Intangibles
Total identifiable assets purchased
Liabilities assumed:
Accrued expenses and other current liabilities
Environmental liabilities
Other non-current liabilities
Total liabilities assumed
Net identifiable assets acquired
Goodwill
Net assets acquired
$
$
5,450
270
112,871
12,936
131,527
(131)
(10,757)
(938)
(11,826)
119,701
18,478
138,179
The Partnership’s third-party valuation firm considered the income, market and cost approaches in estimating the fair
value of the property and equipment and intangible assets. The market and cost approaches were used to value the property and
equipment based on the underlying asset class components of the property and equipment. The income approach was used to
value the dealer supply contracts, in-place leases and franchise rights.
The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated
fair values. The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible
assets, based on the valuation from the Partnership’s third-party valuation firm. Any excess purchase price over the fair value of
the net tangible and intangible assets acquired was allocated to goodwill and assigned to the GDSO reporting unit. The
$18.5 million of goodwill was recognized as the transaction expanded the Partnership’s retail portfolio and geographic footprint
in New England and provides additional volume to the Partnership’s terminals in New York and Vermont. The goodwill is
expected to be tax deductible. The operations of Champlain have been integrated into the GDSO reporting segment.
The fair value of $10.7 million assigned to the assumption of environmental liabilities was developed by management
based on their estimates, assumptions and acquisition history.
The fair values of the remaining Champlain assets and liabilities noted above approximate their carrying values as of the
acquisition date.
The Partnership utilized accounting guidance related to intangible assets which lists the pertinent factors to be
considered when estimating the useful life of an intangible asset. These factors include, in part, a review of the expected
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
use by the Partnership of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired
assets and legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset. The Partnership
amortizes these intangible assets over their estimated useful lives which is consistent with the estimated undiscounted future cash
flows of these assets.
As part of the purchase price allocation, identifiable intangible assets include dealer supply contracts, in-place leases and
franchise rights that are being amortized between one and ten years. Amortization expense related to these intangible assets was
$2.3 million and $1.2 million for the years ended December 31, 2019 and 2018, respectively.
In connection with the acquisition of Champlain, the Partnership incurred acquisition costs of approximately
$3.5 million for the year ended December 31, 2018 which are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.
Champlain’s revenues and net income included in the Partnership’s consolidated operating results from July 17, 2018,
the acquisition date, through December 31, 2018 were immaterial.
2017 Acquisition
Honey Farms, Inc.—On October 18, 2017, the Partnership completed the acquisition of retail gasoline and convenience
store assets from Honey Farms in a cash transaction. The acquisition included 11 company-operated retail sites with gasoline and
convenience stores and 22 company-operated stand-alone convenience stores. All of the sites are located in and around the greater
Worcester, Massachusetts area. The purchase price was approximately $38.5 million, including inventory. The acquisition was
financed with borrowings under the Partnership’s revolving credit facility.
The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance
regarding business combinations. The Partnership’s financial statements include the results of operations of Honey Farms
subsequent to the acquisition date.
In connection with the acquisition of Honey Farms, the Partnership incurred acquisition costs of approximately
$0.7 million which are included in selling, general and administrative expenses in the accompanying consolidated statements of
operations for the year ended December 31, 2017.
Note 21. Segment Reporting
The Partnership engages in the purchasing, selling, gathering, blending, storing and logistics of transporting petroleum
and related products, including gasoline and gasoline blendstocks (such as ethanol), distillates (such as home heating oil, diesel
and kerosene), residual oil, renewable fuels, crude oil and propane. The Partnership also receives revenue from convenience store
sales, rental income and sundries. The Partnership’s three operating segments are based upon the revenue sources for which
discrete financial information is reviewed by the chief operating decision maker (the “CODM”) to make key operating decisions
and assess performance and include Wholesale, GDSO and Commercial.
These operating segments are also the Partnership’s reporting segments. Prior to 2019, the Commercial operating
segment has not met the quantitative metrics for disclosure as a reportable segment on a stand‑alone basis as defined in
accounting guidance related to segment reporting. However, the Partnership has elected to present segment disclosures for the
Commercial operating segment as management believes such disclosures are helpful to the user of the Partnership’s financial
information. The accounting policies of the segments are the same as those described in Note 2, “Summary of Significant
Accounting Policies.”
In the Wholesale reporting segment, the Partnership sells branded and unbranded gasoline and gasoline blendstocks and
diesel to wholesale distributors. The Partnership transports these products by railcars, barges, trucks
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
and/or pipelines pursuant to spot or long‑term contracts. From time to time, the Partnership aggregates crude oil by truck or
pipeline in the mid-continent region of the United States and Canada, transports it by rail and ships it by barge to refiners. The
Partnership sells home heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene, residual oil and
propane to home heating oil and propane retailers and wholesale distributors. Generally, customers use their own vehicles or
contract carriers to take delivery of the gasoline, distillates and propane at bulk terminals and inland storage facilities that the
Partnership owns or controls or at which it has throughput or exchange arrangements. Ethanol is shipped primarily by rail and by
barge.
In the GDSO reporting segment, gasoline distribution includes sales of branded and unbranded gasoline to gasoline
station operators and sub jobbers. Station operations include (i) convenience stores, (ii) rental income from gasoline stations
leased to dealers, from commissioned agents and from cobranding arrangements and (iii) sundries (such as car wash sales and
lottery and ATM commissions).
In the Commercial segment, the Partnership includes sales and deliveries to end user customers in the public sector and
to large commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and bunker
fuel. In the case of public sector commercial and industrial end user customers, the Partnership sells products primarily either
through a competitive bidding process or through contracts of various terms. The Partnership responds to publicly issued requests
for product proposals and quotes. The Partnership generally arranges for the delivery of the product to the customer’s designated
location. The Commercial segment also includes sales of custom blended fuels delivered by barges or from a terminal dock to
ships through bunkering activity.
An important measure used by the Partnership and the CODM to evaluate segment performance is product margin,
which the Partnership defines as product sales minus product costs. Based on the way the business is managed, components of
indirect operating costs and corporate expenses are not allocated to the reportable segments.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Summarized financial information for the Partnership’s reportable segments for the years ended December 31 is
presented in the table below (in thousands):
Wholesale Segment:
Sales
Gasoline and gasoline blendstocks
Crude oil (1)
Other oils and related products (2)
Total
Product margin
Gasoline and gasoline blendstocks
Crude oil (1)
Other oils and related products (2)
Total
Gasoline Distribution and Station Operations Segment:
Sales
Gasoline
Station operations (3)
Total
Product margin
Gasoline
Station operations (3)
Total
Commercial Segment:
Sales
Product margin
Combined sales and Product margin:
Sales
Product margin (4)
Depreciation allocated to cost of sales
Combined gross profit
2019
2018
2017
$
$
$
$
$
$
$
$
$
$
$
$
$
5,358,550
96,419
1,974,897
7,429,866
83,982
(13,047)
51,584
122,519
3,806,892
466,761
4,273,653
374,550
225,078
599,628
1,378,211
28,540
13,081,730
750,687
(87,930)
662,757
$
$
$
$
$
$
$
$
$
$
$
$
$
4,732,028
109,719
2,049,043
6,890,790
76,741
7,159
53,389
137,289
4,081,498
427,211
4,508,709
373,303
203,098
576,401
1,273,103
23,611
12,672,602
737,301
(86,892)
650,409
$
$
$
$
$
$
$
$
$
$
$
$
$
2,097,811
464,234
1,725,537
4,287,582
82,124
7,279
62,799
152,202
3,434,581
351,876
3,786,457
326,536
174,986
501,522
846,513
17,858
8,920,552
671,582
(88,530)
583,052
(1) Crude oil consists of the Partnership’s crude oil sales and revenue from its logistics activities.
(2) Other oils and related products primarily consist of distillates, residual oil and propane.
(3) Station operations consist of convenience store sales, rental income and sundries.
(4) Product margin is a non-GAAP financial measure used by management and external users of the Partnership’s consolidated financial
statements to assess its business. The table above includes a reconciliation of product margin on a combined basis to gross profit, a
directly comparable GAAP measure.
Approximately 500 million gallons, 500 million gallons and 480 million gallons of the GDSO segment’s sales for the
years ended December 31, 2019, 2018 and 2017, respectively, were supplied from petroleum products and renewable fuels
sourced by the Wholesale segment. The Commercial segment’s sales were predominantly sourced by the Wholesale segment.
These intra-segment sales are not reflected as sales in the Wholesale segment as they are eliminated.
None of the Partnership’s customers accounted for greater than 10% of total sales for years ended December 31, 2019,
2018 and 2017.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
A reconciliation of the totals reported for the reportable segments to the applicable line items in the consolidated
financial statements for the years ended December 31 is as follows (in thousands):
Combined gross profit
Operating costs and expenses not allocated to operating segments:
Selling, general and administrative expenses
Operating expenses
(Gain) loss on trustee taxes
Lease exit and termination gain
Amortization expense
Net (gain) loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Total operating costs and expenses
Operating income
Interest expense
Loss on early extinguishment of debt
Income tax (expense) benefit
Net income
Net loss attributable to noncontrolling interest
Net income attributable to Global Partners LP
2019
Year Ended December 31,
2018
2017
$
662,757
$
650,409
$
583,052
170,937
342,382
—
(493)
11,431
(2,730)
2,022
523,549
139,208
(89,856)
(13,080)
(1,094)
35,178
689
35,867
$
171,002
321,115
(52,627)
(3,506)
10,960
5,880
414
453,238
197,171
(89,145)
—
(5,623)
102,403
1,502
103,905
$
155,033
283,650
16,194
—
9,206
(1,624)
809
463,268
119,784
(86,230)
—
23,563
57,117
1,635
58,752
$
The Partnership’s foreign assets and foreign sales were immaterial as of and for the years ended December 31, 2019,
2018 and 2017.
Segment Assets
The Partnership’s terminal assets are allocated to the Wholesale and Commercial segments, and its retail gasoline
stations are allocated to the GDSO segment. Due to the commingled nature and uses of the remainder of the Partnership’s assets,
it is not reasonably possible for the Partnership to allocate these assets among its reportable segments.
The table below presents total assets by reportable segment at December 31, (in thousands):
December 31, 2019
December 31, 2018
Wholesale
$ 773,696 $
$ 615,795 $
Commercial
GDSO
Unallocated
Total
— $ 1,576,655 $ 458,076 $ 2,808,427
— $ 1,415,501 $ 392,995 $ 2,424,291
The increase in total assets from December 31, 2018 is largely due to the adoption of ASC 842 and the associated
recording of right of use assets.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 22. Changes in Accumulated Other Comprehensive Loss
The following table presents the changes in accumulated other comprehensive loss by component (in thousands):
Balance at December 31, 2017
Other comprehensive income before reclassifications of
gain (loss)
Amount of gain (loss) reclassified from accumulated
other comprehensive (loss) income
Total comprehensive income
Balance at December 31, 2018
Other comprehensive income before reclassifications of
gain (loss)
Amount of gain (loss) reclassified from accumulated
other comprehensive (loss) income
Total comprehensive income
Balance at December 31, 2019
$
Pension Plan
Derivatives
Total
$
(5,333) $
(135) $
(5,468)
21
54
75
(5,258)
3
179
182
(5,076) $
133
—
133
(2)
—
2
2
— $
154
54
208
(5,260)
3
181
184
(5,076)
Amounts are presented prior to the income tax effect on other comprehensive income. Given the Partnership’s master
limited partnership status, the effective tax rate is immaterial.
Note 23. Legal Proceedings
General
Although the Partnership may, from time to time, be involved in litigation and claims arising out of its operations in the
normal course of business, the Partnership does not believe that it is a party to any litigation that will have a material adverse
impact on its financial condition or results of operations. Except as described below and in Note 14 included herein, the
Partnership is not aware of any significant legal or governmental proceedings against it or contemplated to be brought against it.
The Partnership maintains insurance policies with insurers in amounts and with coverage and deductibles as its general partner
believes are reasonable and prudent. However, the Partnership can provide no assurance that this insurance will be adequate to
protect it from all material expenses related to potential future claims or that these levels of insurance will be available in the
future at economically acceptable prices.
Other
On January 31, 2020, the Partnership and Global Operating LLC (“Global Operating”) received a notice of arbitration
filed against them by the minority members of Basin Transload alleging, among other things, mismanagement by the Partnership
and Global Operating of certain business arrangements of Basin Transload. The Partnership and Global Operating deny the
allegations set forth in the notice of arbitration and believe they have meritorious defenses to the filing.
On February 20, 2020, the Partnership filed a breach of contract claim against the minority members of Basin Transload
in the United States District Court of Massachusetts, demanding damages in excess of $5.0 million. The Partnership’s claim arises
in connection with the Partnership’s payment in October 2017 of approximately $13.1 million to Tesoro in accordance with the
Partnership’s guaranty of a pipeline connection agreement between Basin Transload and Tesoro. In breach of a separate
agreement among the Partnership and the minority members, each of the minority
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
members of Basin Transload failed to reimburse the Partnership for 20% of any payments made by the Partnership to Tesoro in
connection with the pipeline connection agreement.
During the second quarter ended June 30, 2016, the Partnership determined that gasoline loaded from certain loading
bays at one of its terminals did not contain the necessary additives as a result of an IT-related configuration error. The error was
corrected and all gasoline being sold at the terminal now contains the appropriate additives. Based upon current information, the
Partnership believes approximately 14 million gallons of gasoline were impacted. The Partnership has notified the EPA of this
error. As a result of this error, the Partnership could be subject to fines, penalties and other related claims, including customer
claims.
On August 2, 2016, the Partnership received a Notice of Violation (“NOV”) from the EPA, alleging that permits for the
Partnership’s petroleum product transloading facility in Albany, New York (the “Albany Terminal”), issued by the New York
State Department of Environmental Conservation (“NYSDEC”) between August 9, 2011 and November 7, 2012, violated the
Clean Air Act (the “CAA”) and the federally enforceable New York State Implementation Plan (“SIP”) by increasing throughput
of crude oil at the Albany Terminal without complying with the New Source Review (“NSR”) requirements of the SIP. The
Albany Terminal is a 63-acre licensed, permitted and operational stationary bulk petroleum storage and transfer terminal that
currently consists of petroleum product storage tanks, along with truck, rail and marine loading facilities, for the storage, blending
and distribution of various petroleum and related products, including gasoline, ethanol, distillates, heating and crude oils. The
applicable permits issued by the NYSDEC to the Partnership in 2011 and 2012 specifically authorize the Partnership to increase
the throughput of crude oil at the Albany Terminal. According to the allegations in the NOV, the NYSDEC permit actions should
have been treated as a major modification under the NSR program, requiring additional emission control measures and
compliance with other NSR requirements. The NYSDEC has not alleged that the Partnership’s permits were subject to the NSR
program and the NYSDEC never issued an NOV in the matter. The CAA authorizes the EPA to take enforcement action in
response to violations of the New York SIP seeking compliance and penalties. The Partnership believes that the permits issued by
the NYSDEC comply with the CAA and applicable state air permitting requirements and that no material violation of law has
occurred. The Partnership disputed the claims alleged in the NOV and first responded to the EPA in September 2016. The
Partnership met with the EPA and provided additional information at the agency’s request. On December 16, 2016, the EPA
proposed a Settlement Agreement in a letter to the Partnership relating to the allegations in the NOV. On January 17, 2017, the
Partnership responded to the EPA indicating that the EPA had failed to explain or provide support for its allegations and that the
EPA needed to better explain its positions and the evidence on which it was relying. The EPA did not respond with such
evidence, but instead has requested that the Partnership enter into a series of tolling agreements. The Partnership has signed the
tolling agreements with respect to this matter, as requested by the EPA, and such agreements currently extend through June 30,
2020. To date, the EPA has not taken any further formal action with respect to the NOV.
By letter dated January 25, 2017, the Partnership received a notice of intent to sue (the “2017 NOI”) from Earthjustice
related to alleged violations of the CAA; specifically alleging that the Partnership was operating the Albany Terminal without a
valid CAA Title V Permit. On February 9, 2017, the Partnership responded to Earthjustice advising that the 2017 NOI was
without factual or legal merit and that the Partnership would move to dismiss any action commenced by Earthjustice. No action
was taken by either the EPA or the NYSDEC with regard to the Earthjustice allegations. At this time, there has been no further
action taken by Earthjustice. Neither the EPA nor the NYSDEC has followed up on the 2017 NOI. The Albany Terminal is
currently operating pursuant to its Title V Permit, which has been extended in accordance with the State Administrative
Procedures Act. The Partnership believes that it has meritorious defenses against all allegations.
On March 26, 2015, the Partnership received a Notice of Non-Compliance (“NON”) from the Massachusetts Department
of Environmental Protection (“DEP”) with respect to the Revere terminal (the “Revere Terminal”) located in Boston Harbor in
Revere, Massachusetts, alleging certain violations of the National Pollutant Discharge Elimination System Permit (“NPDES
Permit”) related to storm water discharges. The NON required the Partnership to submit a plan
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
to remedy the reported violations of the NPDES Permit. The Partnership has responded to the NON with a plan and has
implemented modifications to the storm water management system at the Revere Terminal in accordance with the plan. The
Partnership has requested that the DEP acknowledge completion of the required modifications to the storm water management
system in satisfaction of the NON. While no response has yet been received, the Partnership believes that compliance with the
NON has been achieved, and implementation of the plan will have no material impact on its operations.
The Partnership received letters from the EPA dated November 2, 2011 and March 29, 2012, containing requirements
and testing orders (collectively, the “Requests for Information”) for information under the CAA. The Requests for Information
were part of an EPA investigation to determine whether the Partnership has violated sections of the CAA at certain of its terminal
locations in New England with respect to residual oil and asphalt. On June 6, 2014, a NOV was received from the EPA, alleging
certain violations of its Air Emissions License issued by the Maine Department of Environmental Protection, based upon the test
results at the South Portland, Maine terminal. The Partnership met with and provided additional information to the EPA with
respect to the alleged violations. On April 7, 2015, the EPA issued a Supplemental Notice of Violation modifying the allegations
of violations of the terminal’s Air Emissions License. The Partnership has entered into a consent decree (the “Consent Decree”)
with the EPA and the United States Department of Justice (the “Department of Justice”), which was filed in the U.S. District
Court for the District of Maine (the “Court”) on March 25, 2019. The Consent Decree was entered by the Court on December 19,
2019. The Partnership believes that compliance with the Consent Decree and implementation of the requirements of the Consent
Decree will have no material impact on its operations.
Note 24. Quarterly Financial Data (Unaudited)
Unaudited quarterly financial data is as follows (in thousands, except per unit amounts):
First
Second
Third
Fourth
Total
Year ended December 31, 2019
$ 2,979,626 $
Sales
156,844 $
$
Gross profit
29,774 $
$
Operating income
6,794 $
$
Net income (loss) (1)(2)(3)
Net income (loss) attributable to Global Partners LP $
7,126 $
Net income (loss) attributable to common limited
partners
Basic net income (loss) per common limited partner
unit
Diluted net income (loss) per common limited
partner unit
Cash distributions per common limited partner unit
(4)
0.5100 $
5,140 $
0.15 $
0.15 $
$
$
$
$
3,507,540 $
167,143 $
37,875 $
14,371 $
14,489 $
3,245,653 $
187,769 $
50,877 $
14,893 $
15,080 $
3,348,911 $ 13,081,730
662,757
139,208
35,178
35,867
151,001 $
20,682 $
(880) $
(828) $
12,441 $
13,003 $
(2,824) $
27,760
0.37 $
0.38 $
(0.08) $
0.36 $
0.38 $
(0.08) $
0.5150 $
0.5200 $
0.5250 $
0.82
0.81
2.07
The above table reflects certain rounding conventions.
(1)
(2)
Includes a net loss (gain) on sale and disposition of assets of $0.5 million, ($1.1 million), $0.3 million and ($2.4 million) in the first,
second, third and fourth quarters of 2019, respectively.
Includes a goodwill and long-lived asset impairment of $0.6 million and $1.4 million in the third and fourth quarters of 2019,
respectively.
Includes a $13.1 million loss on the early extinguishment of debt related to the 2022 Notes (see Note 8).
(3)
(4) Represents cash distributions earned for the respective period. Cash distributions earned in one calendar quarter are paid in the
following calendar quarter.
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
First
Second
Third
Fourth
Total
Year ended December 31, 2018
$ 2,802,891 $
Sales
144,330 $
$
Gross profit
79,207 $
$
Operating income
58,675 $
Net income (loss) (5)(6)(7)
$
Net income (loss) attributable to Global Partners LP $
59,042 $
Net income (loss) attributable to common limited
partners
Basic net income (loss) per common limited partner
unit
Diluted net income (loss) per common limited
partner unit
Cash distributions per common limited partner unit
(8)
0.4625 $
58,646 $
1.74 $
1.73 $
$
$
$
$
3,126,575 $
149,261 $
27,619 $
6,022 $
6,413 $
3,468,835 $
134,974 $
8,144 $
(14,464) $
(14,080) $
3,274,301 $ 12,672,602
650,409
197,171
102,403
103,905
221,844 $
82,201 $
52,170 $
52,530 $
6,303 $
(15,062) $
50,294 $
100,181
0.19 $
(0.44) $
1.49 $
0.19 $
(0.44) $
1.47 $
0.4750 $
0.4750 $
0.5000 $
2.98
2.95
1.91
The above table reflects certain rounding conventions.
(5)
(6)
Includes a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent liability related to a
Volumetric Ethanol Excise Tax Credit in the first quarter of 2018. See Note 2.
Includes a net loss on sale and disposition of assets of $1.9 million, $3.0 million, $0.9 million and $0.1 million in the first, second, third
and fourth quarters of 2018, respectively.
Includes a lease exit and termination gain of $3.5 million in the third quarter of 2018. See Note 2.
(7)
(8) Represents cash distributions earned for the respective period. Cash distributions earned in one calendar quarter are paid in the
following calendar quarter.
Note 25. Subsequent Events
Distribution to Common Unitholders—On February 14, 2020, the Partnership paid a cash distribution of approximately
$18.3 million to its common unitholders of record as of the close of business on February 10, 2020.
Distribution to Preferred Unitholders—On February 18, 2020, the Partnership paid a cash distribution of
approximately $1.7 million to holders of its Series A Preferred Units of record as of the opening of business on February 3, 2020.
Note 26. Supplemental Guarantor Condensed Consolidating Financial Statements
The Partnership’s wholly-owned subsidiaries, other than GLP Finance, are guarantors of senior notes issued by the
Partnership and GLP Finance. As such, the Partnership is subject to the requirements of Rule 3-10 of Regulation S-X of the SEC
regarding financial statements of guarantors and issuers of registered guaranteed securities. The Partnership presents condensed
consolidating financial information for its subsidiaries within the notes to consolidated financial statements in accordance with the
criteria established for parent companies in the SEC’s Regulation S-X, Rule 3-10(d). The following condensed consolidating
financial information presents the Condensed Consolidating Balance Sheets as of December 31, 2019 and 2018, the Condensed
Consolidating Statements of Operations for the years ended December 31, 2019, 2018 and 2017 and the Condensed Consolidating
Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017 of the Partnership’s 100% owned guarantor
subsidiaries, the non-guarantor subsidiary and the eliminations necessary to arrive at the information for the Partnership on a
consolidated basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and
transactions.
F-67
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Balance Sheet
December 31, 2019
(In thousands)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Accounts receivable—affiliates
Inventories
Brokerage margin deposits
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Right of use assets, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and partners’ equity
Current liabilities:
Accounts payable
Accounts payable—affiliates
Working capital revolving credit facility—current portion
Lease liability—current portion
Environmental liabilities—current portion
Trustee taxes payable
Accrued expenses and other current liabilities
Derivative liabilities
Total current liabilities
Working capital revolving credit facility—less current portion
Revolving credit facility
Senior notes
Long-term lease liability—less current portion
Environmental liabilities—less current portion
Financing obligations
Deferred tax liabilities
Other long—term liabilities
Total liabilities
Partners' equity
Global Partners LP equity
Noncontrolling interest
Total partners' equity
Total liabilities and partners' equity
(Issuer)
Guarantor
Non-
Guarantor
Subsidiaries Subsidiary Eliminations Consolidated
$
11,591 $
412,853
7,823
450,482
34,466
4,564
81,845
1,003,624
1,102,644
296,672
46,765
324,474
31,067
$ 2,805,246 $
$
373,355 $
(17)
148,900
68,143
5,009
42,932
102,737
12,698
753,757
175,000
192,700
690,533
239,308
54,262
148,127
42,879
52,451
2,349,017
451 $
339
3
—
—
—
95
888
2,219
74
—
—
—
3,181 $
31 $
17
—
17
—
—
65
—
130
—
—
—
41
—
—
—
—
171
— $
3
(3)
—
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
12,042
413,195
7,823
450,482
34,466
4,564
81,940
1,004,512
1,104,863
296,746
46,765
324,474
31,067
2,808,427
373,386
—
148,900
68,160
5,009
42,932
102,802
12,698
753,887
175,000
192,700
690,533
239,349
54,262
148,127
42,879
52,451
2,349,188
456,229
—
456,229
$ 2,805,246 $
1,836
1,174
3,010
3,181 $
—
—
—
— $
458,065
1,174
459,239
2,808,427
F-68
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GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Balance Sheet
December 31, 2018
(In thousands)
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Accounts receivable—affiliates
Inventories
Brokerage margin deposits
Derivative assets
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and partners' equity
Current liabilities:
Accounts payable
Accounts payable—affiliates
Working capital revolving credit facility—current portion
Environmental liabilities—current portion
Trustee taxes payable
Accrued expenses and other current liabilities
Derivative liabilities
Total current liabilities
Working capital revolving credit facility—less current portion
Revolving credit facility
Senior notes
Environmental liabilities—less current portion
Financing obligations
Deferred tax liabilities
Other long—term liabilities
Total liabilities
Partners' equity
Global Partners LP equity
Noncontrolling interest
Total partners' equity
Total liabilities and partners' equity
(Issuer)
Guarantor
Non-
Guarantor
Subsidiaries Subsidiary Eliminations Consolidated
$
7,050 $
334,689
5,435
386,442
14,766
26,390
98,877
873,649
1,128,826
58,532
327,406
30,813
$ 2,419,226 $
$
308,941 $
(169)
103,300
6,092
42,613
117,149
4,494
582,420
150,000
220,000
664,455
57,132
149,997
42,856
57,905
1,924,765
1,071 $
52
36
—
—
—
100
1,259
3,806
—
—
—
5,065 $
38 $
169
—
—
—
125
—
332
—
—
—
—
—
—
—
332
— $
36
(36)
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,121
334,777
5,435
386,442
14,766
26,390
98,977
874,908
1,132,632
58,532
327,406
30,813
2,424,291
308,979
—
103,300
6,092
42,613
117,274
4,494
582,752
150,000
220,000
664,455
57,132
149,997
42,856
57,905
1,925,097
494,461
—
494,461
$ 2,419,226 $
2,870
1,863
4,733
5,065 $
—
—
—
— $
497,331
1,863
499,194
2,424,291
F-69
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2019
(In thousands)
Sales
Cost of sales
Gross profit
Costs and operating expenses:
Selling, general and administrative expenses
Operating expenses
Lease exit and termination gain
Amortization expense
Net gain on sale and disposition of assets
Goodwill and long-lived asset impairment
Total costs and operating expenses
Operating income (loss)
Interest expense
Loss on early extinguishment of debt
Income (loss) before income tax expense
Income tax expense
Net income (loss)
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Global Partners LP
Less: General partners' interest in net income, including
incentive distribution rights
Less: Series A preferred limited partner interest in net income
Net income (loss) attributable to common limited partners
$
F-70
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
$
13,080,376 $
12,417,835
662,541
Eliminations Consolidated
13,081,730
12,418,973
662,757
(494) $
(494)
—
1,848 $
1,632
216
170,546
340,833
(493)
11,431
(2,730)
2,022
521,609
140,932
(89,856)
(13,080)
37,996
(1,094)
36,902
—
36,902
1,379
6,728
28,795 $
391
1,549
—
—
—
—
1,940
(1,724)
—
—
(1,724)
—
(1,724)
689
(1,035)
—
—
(1,035) $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
170,937
342,382
(493)
11,431
(2,730)
2,022
523,549
139,208
(89,856)
(13,080)
36,272
(1,094)
35,178
689
35,867
1,379
6,728
27,760
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2018
(In thousands)
Sales
Cost of sales
Gross profit (loss)
Costs and operating expenses:
Selling, general and administrative expenses
Operating expenses
Gain on trustee taxes
Lease exit and termination gain
Amortization expense
Net loss on sale and disposition of assets
Goodwill and long-lived asset impairment
Total costs and operating expenses
Operating income (loss)
Interest expense
Income (loss) before income tax expense
Income tax expense
Net income (loss)
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Global Partners LP
Less: General partners' interest in net income, including
incentive distribution rights
Less: Series A preferred limited partner interest in net income
Net income (loss) attributable to common limited partners
$
F-71
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
$
12,671,866 $
12,019,610
652,256
Eliminations Consolidated
12,672,602
12,022,193
650,409
(434) $
(434)
—
1,170 $
3,017
(1,847)
170,611
319,598
(52,627)
(3,506)
10,960
5,880
414
451,330
200,926
(89,145)
111,781
(5,623)
106,158
—
106,158
1,033
2,691
102,434 $
391
1,517
—
—
—
—
—
1,908
(3,755)
—
(3,755)
—
(3,755)
1,502
(2,253)
—
—
(2,253) $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
171,002
321,115
(52,627)
(3,506)
10,960
5,880
414
453,238
197,171
(89,145)
108,026
(5,623)
102,403
1,502
103,905
1,033
2,691
100,181
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Operations
For the Year Ended December 31, 2017
(In thousands)
Sales
Cost of sales
Gross profit (loss)
Costs and operating expenses:
Selling, general and administrative expenses
Operating expenses
Loss on trustee taxes
Amortization expense
Net gain on sale and disposition of assets
Goodwill and long-lived asset impairment
Total costs and operating expenses
Operating income (loss)
Interest expense
Income (loss) before income tax benefit
Income tax benefit
Net (income) loss
Net loss attributable to noncontrolling interest
Net income (loss) attributable to Global Partners LP
Less: General partners' interest in net income (loss), including
incentive distribution rights
Net income (loss) attributable to common limited partners
$
F-72
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
$
8,917,997 $
8,332,940
585,057
Eliminations Consolidated
8,920,552
8,337,500
583,052
(381) $
(381)
—
2,936 $
4,941
(2,005)
154,611
281,973
16,194
9,206
(1,607)
809
461,186
123,871
(86,230)
37,641
23,563
61,204
—
61,204
422
1,677
—
—
(17)
—
2,082
(4,087)
—
(4,087)
—
(4,087)
1,635
(2,452)
—
—
—
—
—
—
—
—
—
—
—
—
—
155,033
283,650
16,194
9,206
(1,624)
809
463,268
119,784
(86,230)
33,554
23,563
57,117
1,635
58,752
394
60,810 $
—
(2,452) $
—
— $
394
58,358
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2019
(In thousands)
Cash flows from operating activities
Net cash provided by (used in) operating activities
Cash flows from investing activities
Capital expenditures
Seller note issuances
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Net borrowings from working capital revolving credit facility
Net payments on revolving credit facility
Proceeds from senior notes, net
Repayment of senior notes
LTIP units withheld for tax obligations
Distributions to limited partners and general partner
Net cash used in financing activities
Cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
Consolidated
$
95,022 $
(620) $
94,402
(82,864)
(1,410)
17,060
(67,214)
70,600
(27,300)
392,602
(381,886)
(657)
(76,626)
(23,267)
—
—
—
—
—
—
—
—
—
—
—
(82,864)
(1,410)
17,060
(67,214)
70,600
(27,300)
392,602
(381,886)
(657)
(76,626)
(23,267)
4,541
7,050
11,591 $
(620)
1,071
451 $
3,921
8,121
12,042
$
F-73
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2018
(In thousands)
Cash flows from operating activities
Net cash provided by (used in) operating activities
Cash flows from investing activities
Acquisitions
Capital expenditures
Seller note issuances
Proceeds from sale of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issuance of Series A preferred units
Net borrowings from working capital revolving credit facility
Net borrowings from revolving credit facility
LTIP units withheld for tax obligations
Distributions to limited partners and general partner
Net cash provided by financing activities
Cash and cash equivalents
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
Consolidated
$
169,608 $
(752) $
168,856
(171,620)
(69,174)
(3,337)
18,411
(225,720)
66,366
26,600
24,000
(835)
(66,004)
50,127
—
—
—
—
—
—
—
—
—
—
—
(5,985)
13,035
7,050 $
(752)
1,823
1,071 $
$
(171,620)
(69,174)
(3,337)
18,411
(225,720)
66,366
26,600
24,000
(835)
(66,004)
50,127
(6,737)
14,858
8,121
F-74
Table of Contents
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Condensed Consolidating Statement of Cash Flows
For the Year Ended December 31, 2017
(In thousands)
Cash flows from operating activities
Net cash provided by operating activities
Cash flows from investing activities
Acquisitions
Capital expenditures
Seller note issuances
Proceeds from sale of property and equipment
Net cash used in (provided by) investing activities
Cash flows from financing activities
Net payments on working capital revolving credit facility
Net payments on revolving credit facility
LTIP units withheld for tax obligations
Noncontrolling interest capital contribution
Distribution to noncontrolling interest
Distributions to limited partners and general partner
Net cash used in financing activities
Cash and cash equivalents
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(Issuer)
Guarantor
Subsidiaries
Non-
Guarantor
Subsidiary
Consolidated
$
346,829 $
1,613 $
348,442
(38,479)
(49,866)
(6,086)
32,767
(61,664)
(197,900)
(20,700)
(522)
279
—
(62,660)
(281,503)
—
—
—
20
20
—
—
—
—
(465)
—
(465)
(38,479)
(49,866)
(6,086)
32,787
(61,644)
(197,900)
(20,700)
(522)
279
(465)
(62,660)
(281,968)
3,662
9,373
13,035 $
$
1,168
655
1,823 $
4,830
10,028
14,858
F-75
Table of Contents
Item 15(a)
GLOBAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
GLOBAL PARTNERS LP
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 and 2017
(In thousands)
Description
Year ended December 31, 2019
Allowance for doubtful accounts—
accounts receivable
Year ended December 31, 2018
Allowance for doubtful accounts—
accounts receivable
Year ended December 31, 2017
Allowance for doubtful accounts—
accounts receivable
$
$
$
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Recoveries
Write Offs Adjustment
Other
Balance
at End
of Period
2,433 $
177 $
507 $
(388) $
— $
2,729
4,605 $
754 $
— $
(2,947) $
21 $
2,433
5,549 $
211 $
38 $
(997) $
(196) $
4,605
F-76
Exhibit 4.4
Exhibit 4.4
DESCRIPTION OF THE REGISTRANT’S COMMON UNITS
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The Common Units
The common units represent limited partner interests in us. The holders are entitled to participate in partnership
distributions and are entitled to exercise the rights or privileges available to limited partners under our partnership
agreement. For a description of the relative rights and preferences of holders of common units in and to partnership
distributions, please read this section and “How We Make Cash Distributions.” For a description of the voting rights, rights
of distribution upon liquidation and other rights and privileges of limited partners, including our common units under our
partnership agreement, please read “The Partnership Agreement.”
Our common units are traded on the NYSE under the symbol “GLP.”
Transfer of Common Units
By acceptance of the transfer of a common unit in accordance with our partnership agreement, the transferee of common
units:
·
·
·
·
·
·
becomes the record holder of the common units and is an assignee until admitted into our partnership as a
substituted limited partner;
automatically requests admission as a substituted limited partner in our partnership;
agrees to be bound by the terms and conditions of, and executes, our partnership agreement;
represents that the transferee has the capacity, power and authority to enter into our partnership agreement;
grants powers of attorney to officers of our general partner and any liquidator of us as specified in our partnership
agreement; and
gives the consents, covenants, representations and approvals contained in our partnership agreement, such as the
approval of all transactions and agreements we entered into in connection with our initial public offering.
An assignee will become a substituted limited partner of our partnership for the transferred common units automatically
upon the recording of the transfer on our books and records. Our general partner will cause any unrecorded transfers to be
recorded on our books and records no less frequently than quarterly.
We are entitled to treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holder’s
rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial
owner and the nominee holder.
Common units are securities and are transferable according to the laws governing transfer of securities. In addition to
other rights acquired upon transfer, the transferor gives the transferee the right to request admission as a substituted limited
partner in our partnership for the transferred common units.
Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the unit
as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.
1
How We Make Cash Distributions
General
Our cash distribution policy reflects a basic judgment that our common unitholders will be better served by our
distributing our available cash rather than retaining it. Because we are not subject to an entity-level federal income tax, we
have more cash to distribute to our common unitholders than would be the case were we subject to tax.
Our cash distribution policy is consistent with the terms of our partnership agreement which requires us to distribute
available cash to common unitholders on a quarterly basis. Our determination of available cash takes into account the need to
maintain certain cash reserves to preserve our distribution levels across seasonal and cyclical fluctuations in our business.
Because we intend to distribute the majority of the cash generated from our business to our common unitholders, we
will in large part rely upon external financing sources, including commercial borrowings and other debt and equity
issuances, to fund our capital expenditures. To the extent we are unable to finance growth externally, our cash distribution
policy could significantly impair our ability to grow.
There is no guarantee that common unitholders will receive quarterly distributions from us. Our distribution policy is
subject to certain restrictions and may be changed at any time, including:
·
·
·
·
·
Our distribution policy is subject to certain restrictions on distributions under our current and anticipated debt
agreements. Should we be unable to satisfy these restrictions under our debt agreements, we would be prohibited
from making distributions to our common unitholders notwithstanding our stated distribution policy.
The board of directors of our general partner has broad discretion to establish reserves for the prudent conduct of
our business and the establishment of those reserves could result in a reduction of our stated distribution policy.
Even if our cash distribution policy is not modified or revoked, the amount of distributions paid and the decision to
make any distribution is determined by our general partner, taking into consideration the terms of our partnership
agreement.
Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”), we may
not make distributions to our common unitholders if the distribution would cause our liabilities to exceed the fair
value of our assets.
We may lack sufficient cash to pay distributions to our common unitholders due to increases in selling, general and
administrative expenses, capital expenditures, principal and interest payments on our outstanding debt, working
capital requirements and anticipated cash needs or due to significant decreases in demand for the products we sell
or in demand for our logistics activities.
Distributions of Available Cash
General
Subject to the rights of holders of our 9.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual
Preferred Units (“Series A Preferred Units”), within 45 days after the end of each quarter, we distribute all of our available
cash to common unitholders of record on the applicable record date.
Definition of Available Cash
Available cash generally means, for each fiscal quarter, all cash on hand at the end of the quarter less the amount of cash
reserves established by our general partner to:
·
provide for the proper conduct of our business;
2
·
·
·
comply with applicable law, any of our debt instruments, or other agreements;
provide funds for payments to holders of our Series A Preferred Units in respect of any one or more of the next four
quarters; or
provide funds for distributions to our unitholders and to our general partner for any one or more of the next four
quarters.
Intent to Distribute the Minimum Quarterly Distribution
We intend to distribute to the holders of common units on a quarterly basis at least the minimum quarterly distribution
of $0.4625 per unit, or $1.85 per year, to the extent we have sufficient cash from our operations after establishment of cash
reserves and payment of fees and expenses, including payments to our general partner. However, there is no guarantee that
we will pay the minimum quarterly distribution on the common units in any quarter. Even if our cash distribution policy is
not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is
determined by our general partner, taking into consideration the terms of our partnership agreement. We are prohibited from
making any distributions to common unitholders if it would cause an event of default, or an event of default is existing,
under our credit agreement.
General Partner Interest and Incentive Distribution Rights
Our general partner is entitled to 0.67% of all quarterly common unit distributions that we make prior to our liquidation.
This general partner interest is represented by 230,303 general partner units. Our general partner has the right, but not the
obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest. The general
partner’s 0.67% interest in these distributions may be reduced if we issue additional common units in the future and our
general partner does not contribute a proportionate amount of capital to us to maintain its 0.67% general partner interest. Our
general partner also currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a
maximum of 48.67%, of the cash we distribute from distributable cash flow (as defined below) in excess of $0.4625 per unit.
The maximum distribution of 48.67% includes distributions paid to our general partner on its 0.67% general partner interest,
and assumes that our general partner maintains its general partner interest at 0.67%. The maximum distribution of
approximately 48.67% does not include any distributions that our general partner may receive on units that it owns. Please
read “—Distributions of Available Cash from Distributable Cash Flow” for additional information.
Series A Preferred Units
On August 7, 2018, we issued 2,760,000 of our Series A Preferred Units at a price of $25.00 per Series A Preferred
Unit. We used the proceeds, net of underwriting discount and expenses, of $66.4 million to reduce indebtedness under our
credit agreement.
The Series A Preferred Units are a new class of equity security that ranks senior to the common units, the incentive
distribution rights and each other class or series of our equity securities established after August 7, 2018, the original issue
date of the Series A Preferred Units (the “Original Issue Date”), that is not expressly made senior to or on parity with the
Series A Preferred Units as to the payment of distributions and amounts payable on a liquidation event.
Distributions on the Series A Preferred Units are cumulative from the Original Issue Date and payable quarterly in
arrears on February 15, May 15, August 15 and November 15 of each year, commencing on November 15, 2018 (each, a
“Distribution Payment Date”), to holders of record as of the opening of business on the February 1, May 1, August 1 or
November 1 next preceding the Distribution Payment Date, in each case, when, as, and if declared by the general partner out
of legally available funds for such purpose. Distributions on the Series A Preferred Units will be paid out of our available
cash with respect to the quarter ended immediately preceding the applicable Distribution Payment Date. No distribution may
be declared or paid or set apart for payment on any junior securities (other than a distribution payable solely in junior
securities) unless full cumulative distributions have been or contemporaneously are being paid or provided for on all
outstanding Series A Preferred Units and any parity securities through the most recent respective distribution periods.
3
The initial distribution rate for the Series A Preferred Units from and including the Original Issue Date, but excluding,
August 15, 2023 is 9.75% per annum of the $25.00 liquidation preference per Series A Preferred Unit (equal to $2.4375 per
Series A Preferred Unit per annum). On and after August 15, 2023, distributions on the Series A Preferred Units will
accumulate for each distribution period at a percentage of the $25.00 liquidation preference equal to an annual floating rate
of the three-month LIBOR plus a spread of 6.774% per annum.
Distributable Cash Flow and Capital Surplus
General
All cash distributed to unitholders will be characterized as either “distributable cash flow” or “capital surplus.” We
distribute available cash from distributable cash flow differently than available cash from capital surplus.
Definition of Distributable Cash Flow
Distributable cash flow, for any period, means, on a cumulative basis since the closing date of our initial public offering
and without duplication, the sum of net income plus depreciation and amortization, in each case calculated in accordance
with accounting principles generally accepted in the United States, minus maintenance capital expenditures (as defined
below), as adjusted to eliminate items approved by the audit committee of the board of directors of our general partner that
are extraordinary or non-recurring in nature and that would otherwise increase distributable cash flow.
Maintenance capital expenditures represent capital expenditures to replace partially or fully depreciated assets to
maintain the operating capacity of or sales and revenues generated by existing assets or to extend the useful lives of such
assets. Maintenance capital expenditures include expenditures required to maintain equipment reliability, tankage and
pipeline integrity and safety and to address environmental regulations. Repair and maintenance expenses associated with
existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses
as incurred. The officers and directors of our general partner determine if an expenditure is a maintenance capital
expenditure.
Characterization of Cash Distributions
We treat all available cash distributed as coming from distributable cash flow until the sum of all available cash
distributed since we began operations equals the distributable cash flow as of the most recent date of determination of
available cash. We treat any amount distributed in excess of distributable cash flow, regardless of its source, as capital
surplus. We do not anticipate that we will make any distributions from capital surplus.
Distributions of Available Cash from Distributable Cash Flow
We will make distributions of available cash from distributable cash flow for any quarter in the following manner:
First, 99.33% to all common unitholders, pro rata, and 0.67% to our general partner, until each common unitholder
receives a total of $0.4625 per unit for that quarter (the “first target distribution”);
Second, 86.33% to all common unitholders, pro rata, and 13.67% to our general partner, until each common
unitholder receives a total of $0.5375 per unit for that quarter (the “second target distribution”);
Third, 76.33% to all common unitholders, pro rata, and 23.67% to our general partner, until each common
unitholder receives a total of $0.6625 per unit for that quarter (the “third target distribution”); and
Thereafter, 51.33% to all common unitholders, pro rata, and 48.67% to our general partner.
·
·
·
·
The preceding discussion is based on the assumptions that our general partner maintains its 0.67% general partner
interest and that we do not issue additional classes of equity securities.
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available
cash from distributable cash flow after certain target distribution levels have been achieved. The
4
percentages set forth above for our general partner include the incentive distribution rights. Our general partner currently
holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to
restrictions in our partnership agreement.
Percentage Allocations of Available Cash from Distributable Cash Flow
The following table illustrates the percentage allocations of the additional available cash from distributable cash flow
between the common unitholders and our general partner up to the various target distribution levels. The amounts set forth
under “Marginal Percentage Interest in Distributions” are the percentage interests of our general partner and the common
unitholders in any available cash from distributable cash flow we distribute up to and including the corresponding amount in
the column “Total Quarterly Distribution,” until available cash from distributable cash flow we distribute reaches the next
target distribution level, if any. The percentage interests shown for the common unitholders and the general partner for the
first target distribution are also applicable to quarterly distribution amounts that are less than the first target distribution. The
percentage interests set forth below for our general partner include its 0.67% general partner interest and assume the general
partner has not transferred its incentive distribution rights.
First Target Distribution
Second Target Distribution
Third Target Distribution
Thereafter
Distributions from Capital Surplus
Total Quarterly Distribution
Target Amount
up to $0.4625
above $0.4625 up to $0.5375
above $0.5375 up to $0.6625
above $0.6625
Marginal Percentage
Interest in Distributions
Unitholders General Partner
0.67 %
13.67 %
23.67 %
48.67 %
99.33 %
86.33 %
76.33 %
51.33 %
How Distributions from Capital Surplus Will Be Made
We will make distributions of available cash from capital surplus, if any, in the following manner:
·
·
First, 99.33% to all common unitholders, pro rata, and 0.67% to the general partner, until we distribute for each
common unit an amount of available cash from capital surplus equal to the initial public offering price; and
Thereafter, we will make all distributions of available cash from capital surplus as if they were from distributable
cash flow.
Effect of a Distribution from Capital Surplus
The partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from our
initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus
per common unit is referred to as the “unrecovered initial unit price.” Each time a distribution of capital surplus is made, the
target distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit
price. Because distributions of capital surplus will reduce the target distributions, after any of these distributions are made, it
may be easier for the general partner to receive incentive distributions.
Once we distribute capital surplus on a common unit in an amount equal to the initial unit price, we will reduce the
target distribution levels to zero. We will then make all future distributions from distributable cash flow, with 51.33% being
paid to the holders of common units and 48.67% to the general partner. The percentage interests shown for our general
partner include its 0.67% general partner interest and assume the general partner has not transferred the incentive distribution
rights.
5
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjusting the target distribution levels to reflect a distribution of capital surplus, if we combine our
common units into fewer units or subdivide our common units into a greater number of units, we will proportionately adjust:
·
·
target distribution levels; and
the unrecovered initial unit price.
For example, if a two-for-one split of the common units should occur, the target distribution levels and the unrecovered
initial unit price would each be reduced to 50% of its initial level. We will not make any adjustment by reason of the
issuance of additional units for cash or property.
In addition, if legislation is enacted or if existing law is modified or interpreted by a governmental taxing authority, so
that we become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax
purposes, we will reduce the target distribution levels for each quarter by multiplying each distribution level by a fraction,
the numerator of which is available cash for that quarter and the denominator of which is the sum of available cash for that
quarter plus the general partner’s estimate of our aggregate liability for the quarter for such income taxes payable by reason
of such legislation or interpretation. To the extent that the actual tax liability differs from the estimated tax liability for any
quarter, the difference will be accounted for in subsequent quarters.
The amount of distributions paid under our cash distribution policy and the decision to make any distribution is
determined by our general partner, taking into consideration the terms of our partnership agreement.
Distributions of Cash Upon Liquidation
General
If we dissolve in accordance with our partnership agreement, we will sell or otherwise dispose of our assets in a process
called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any
remaining proceeds to the partners, in accordance with their capital account balances, as adjusted to reflect any gain or loss
upon the sale or other disposition of our assets in liquidation; provided, that any unpaid cash distributions on our Series A
Preferred Units shall be paid prior to the making of any such distributions.
The allocations of gain and loss upon liquidation are intended, to the extent possible, to entitle the holders of
outstanding common units to receive their unrecovered initial unit. However, there may not be sufficient gain upon our
liquidation to enable the holders of common units to fully recover all of these amounts.
Manner of Adjustments for Gain
The manner of the adjustment for gain is set forth in our partnership agreement. If liquidation occurs, the holders of
outstanding Series A Preferred Units will first be specially allocated items of our gross income and gain in a manner
designed to cause such holders to have a positive capital balance equal to the liquidation preference of $25.00 per Series A
Preferred Unit. We will then allocate any gain to the partners in the following manner:
·
·
First, to the partners who have negative balances in their capital accounts to the extent of and in proportion to those
negative balances;
Second, 99.33% to the common unitholders, pro rata, and 0.67% to the general partner, until the capital account for
each common unit is equal to the sum of:
(1)
(2)
the unrecovered initial unit price; and
the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;
6
·
·
·
·
Third, 99.33% to all common unitholders, pro rata, and 0.67% to the general partner, until we allocate under this
paragraph an amount per unit equal to:
(1)
(2)
the sum of the excess of the first target distribution per common unit over the minimum quarterly
distribution per common unit for each quarter of our existence; less
the cumulative amount per common unit of any distributions of available cash from distributable cash
flow in excess of the minimum quarterly distribution per common unit that we distributed 99.33% to the
common unitholders, pro rata, and 0.67% to the general partner, for each quarter of our existence;
Fourth, 86.33% to all common unitholders, pro rata, and 13.67% to the general partner, until we allocate under this
paragraph an amount per unit equal to:
(1)
(2)
the sum of the excess of the second target distribution per common unit over the first target distribution
per common unit for each quarter of our existence; less
the cumulative amount per common unit of any distributions of available cash from distributable cash
flow in excess of the first target distribution per common unit that we distributed 86.33% to the common
unitholders, pro rata, and 13.67% to the general partner for each quarter of our existence;
Fifth, 76.33% to all common unitholders, pro rata, and 23.67% to the general partner, until we allocate under this
paragraph an amount per unit equal to:
(1)
(2)
the sum of the excess of the third target distribution per unit over the second target distribution per
common unit for each quarter of our existence; less
the cumulative amount per common unit of any distributions of available cash from distributable cash
flow in excess of the second target distribution per common unit that we distributed 76.33% to the unitholders,
pro rata, and 23.67% to the general partner for each quarter of our existence; and
Thereafter, 51.33% to all common unitholders, pro rata, and 48.67% to the general partner.
The percentage interests set forth above for our general partner include its 0.67% general partner interest and assume the
general partner has not transferred the incentive distribution rights.
Manner of Adjustments for Losses
If liquidation occurs, we will generally allocate any loss to the partners in the following manner:
First, 99.33% to the holders of common units in proportion to the positive balances in their capital accounts and
0.67% to the general partner, until the capital accounts of the common unitholders have been reduced to zero;
Second, to all partners holding Series A Preferred Units, pro rata, until the capital account in respect of each Series
A Preferred Unit has been reduced to zero; and
Thereafter, 100% to the general partner.
·
·
·
Adjustments to Capital Accounts
We will make adjustments to capital accounts upon the issuance of additional units. In doing so, we will allocate any
unrealized and, for tax purposes, unrecognized gain or loss resulting from the adjustments to the unitholders and the general
partner in the same manner as we allocate gain or loss upon liquidation. In the event that we make positive adjustments to
the capital accounts upon the issuance of additional units, we will allocate any later negative adjustments to the capital
accounts resulting from the issuance of additional units or upon our liquidation in a manner which results, to the extent
possible, in the general partner’s capital account balances equaling the amount which they would have been if no earlier
positive adjustments to the capital accounts had been made.
7
The Partnership Agreement
The following is a summary of certain material provisions of our partnership agreement that relate to ownership of our
common units.
Capital Contributions
Common unitholders are not obligated to make additional capital contributions, except as described below under “—
Limited Liability.”
Voting Rights
The following matters require the limited partners vote specified below. Various matters require the approval of a “unit
majority,” which means the approval of a majority of the common units.
In voting their common units, our general partner and its affiliates have no duty or obligation whatsoever to us or the
limited partners, including any duty to act in good faith or in the best interests of us and our limited partners.
The following is a summary of the vote requirements specified for certain matters under our partnership agreement:
Issuance of additional units
Amendment of our partnership agreement
Merger of our partnership or the sale of all or substantially
all of our assets
Dissolution of our partnership
Continuation of our partnership upon dissolution
Removal of our general partner
Transfer of our general partner interest
Transfer of ownership interests in our general partner
8
Except in the case of the issuance of units that rank equal to
or senior to the Series A Preferred Units, no approval
required.
Certain amendments may be made by our general partner
without the approval of the limited partners. Other
amendments generally require the approval of a unit
majority. Unless we have received the affirmative vote or
consent of the holders of at least two-thirds of the
outstanding Series A Preferred Units, voting as a separate
class, we may not adopt any amendment to our partnership
agreement that would have a material adverse effect on the
terms of the Series A Preferred Units. Please read “—
Amendment of Our Partnership Agreement.”
Unit majority in certain circumstances. Please read “—
Merger, Sale or Other Disposition of Assets.”
Unit majority. Please read “—Termination and
Dissolution.”
Unit majority. Please read “—Termination and
Dissolution.”
Not less than 66 2/3% of the outstanding common units,
voting as a single class, including common units held by our
general partner and its affiliates. Please read “—Withdrawal
or Removal of Our General Partner.”
Our general partner may transfer all, but not less than all, of
its general partner interest in us without a vote of our
limited partners to an affiliate or to another person in
connection with its merger or consolidation with or into, or
sale of all or substantially all of its assets to, such person.
No approval required at any time.
Limited Liability
Participation in the Control of Our Partnership
Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware
Act and that he otherwise acts in conformity with the provisions of our partnership agreement, his liability under the
Delaware Act will be limited, subject to possible exceptions, to the amount of capital he is obligated to contribute to us for
his common units plus his share of any undistributed profits and assets. If it were determined, however, that the right, or
exercise of the right, by the limited partners as a group:
·
·
·
to remove or replace our general partner;
to approve some amendments to our partnership agreement; or
to take other action under our partnership agreement;
constituted “participation in the control” of our business for the purposes of the Delaware Act, then the limited partners
could be held personally liable for our obligations under the laws of Delaware, to the same extent as our general partner.
This liability would extend to persons who transact business with us who reasonably believe that the limited partner is a
general partner. Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse against our
general partner if a limited partner were to lose limited liability through any fault of our general partner. While this does not
mean that a limited partner could not seek legal recourse, we know of no precedent for such a claim in Delaware case law.
Unlawful Partnership Distribution
Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all
liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities
for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of the assets
of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware
Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in
the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability.
The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the
distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution
for three years. Under the Delaware Act, an assignee who becomes a substituted limited partner of a limited partnership is
liable for the obligations of his assignor to make contributions to the partnership, except the assignee is not obligated for
liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the partnership
agreement.
Failure to Comply with the Limited Liability Provisions of Jurisdictions in Which We Do Business
We conduct business in a number of jurisdictions. Maintenance of our limited liability as a member of our operating
company may require compliance with legal requirements in the jurisdictions in which our operating company conducts
business, including qualifying our subsidiaries to do business there.
Limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly
established in many jurisdictions. If, by virtue of our membership interest in our operating company or otherwise, it were
determined that we were conducting business in any state without compliance with the applicable limited partnership or
limited liability company statute, or that the right or exercise of the right by the limited partners as a group to remove or
replace our general partner, to approve some amendments to our partnership agreement or to take other action under our
partnership agreement constituted “participation in the control” of our business for purposes of the statutes of any relevant
jurisdiction, then the limited partners could be held personally liable for our obligations under the law of that jurisdiction to
the same extent as the general partner under the circumstances. We operate in a manner that our general partner considers
reasonable and necessary or appropriate to preserve the limited liability of the limited partners.
9
Issuance of Additional Securities
Except in the case of the issuance of units that rank equal to or senior to the Series A Preferred Units, our partnership
agreement authorizes us to issue an unlimited number of additional partnership securities for the consideration and on the
terms and conditions determined by our general partner without the approval of the limited partners.
It is possible that we will fund acquisitions through the issuance of additional common units or other partnership
securities. Holders of any additional common units we issue will be entitled to share equally with the then-existing holders of
common units in our distributions of available cash. In addition, the issuance of additional common units or other partnership
securities may dilute the value of the interests of the then-existing holders of common units in our net assets.
In accordance with Delaware law and the provisions of our partnership agreement, we may also issue additional
partnership securities that, as determined by our general partner, may have special voting rights to which the common units
are not entitled. In addition, our partnership agreement does not prohibit the issuance by our subsidiaries of equity securities,
which may effectively rank senior to the common units.
Upon issuance of additional partnership securities, our general partner has the right, but not the obligation, to make
additional capital contributions to the extent necessary to maintain its 0.67% general partner interest in us. Our general
partner’s 0.67% interest in us will be reduced if we issue additional common units in the future and our general partner does
not contribute a proportionate amount of capital to us to maintain its 0.67% general partner interest. Moreover, our general
partner has the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common
units or other partnership securities whenever, and on the same terms that, we issue those securities to persons other than our
general partner and its affiliates, to the extent necessary to maintain its and its affiliates’ percentage interest, including such
interest represented by common units, that existed immediately prior to each issuance. The holders of common units do not
have preemptive rights to acquire additional common units or other partnership securities.
Amendment of Our Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by our general partner. However, our general partner
has no duty or obligation to propose any amendment and may decline to do so free of any duty or obligation whatsoever to
us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. In order
to adopt a proposed amendment, other than the amendments discussed below, our general partner must seek written approval
of the holders of the number of units required to approve the amendment or call a meeting of the limited partners to consider
and vote upon the proposed amendment. Except as described below, an amendment must be approved by a unit majority.
Prohibited Amendments
No amendment may:
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enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type
or class of limited partner interests so affected; or
enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts
distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the
consent of our general partner, which may be given or withheld in at its option.
The provision of our partnership agreement preventing the amendments having the effects described in the bullets above
can be amended upon the approval of the holders of at least 90% of the outstanding common units voting together as a single
class (including units owned by our general partner and its affiliates).
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No Limited Partner Approval
Our general partner may generally make amendments to our partnership agreement without the approval of any limited
partner or assignee to reflect:
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·
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a change in our name, the location of our principal place of business, our registered agent or our registered office;
the admission, substitution, withdrawal, or removal of partners in accordance with the partnership agreement;
a change that our general partner determines to be necessary or appropriate for us to qualify or to continue our
qualification as a limited partnership or a partnership in which the limited partners have limited liability under the
laws of any state or to ensure that neither we, our operating company, nor its subsidiaries will be treated as an
association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes (to the extent
not already so treated or taxed);
an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors,
officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of
1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement
Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently
applied or proposed;
subject to the rights of holders of our Series A Preferred Units, an amendment that our general partner determines
to be necessary or appropriate for the authorization of additional partnership securities or rights to acquire
partnership securities;
any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone;
an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the
terms of our partnership agreement;
any amendment that our general partner determines to be necessary or appropriate for the formation by us of, or our
investment in, any corporation, partnership, or other entity, as otherwise permitted by our partnership agreement;
a change in our fiscal year or taxable year and related changes;
mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or
operations at the time of the merger or conveyance other than those it receives by way of the merger or conveyance;
or
any other amendments substantially similar to any of the matters described above.
In addition, subject to the rights of holders of our Series A Preferred Units, our general partner may make amendments
to our partnership agreement without the approval of any limited partner or assignee if our general partner determines that
those amendments:
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do not adversely affect the limited partners (or any particular class of limited partners) in any material respect;
are necessary or appropriate to satisfy any requirements, conditions, or guidelines contained in any opinion,
directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal
or state statute;
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·
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are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule,
regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be
listed for trading;
are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units
under the provisions of our partnership agreement; or
are required to effect the intent expressed in registration statement for our initial public offering or the intent of the
provisions of our partnership agreement or are otherwise contemplated by our partnership agreement.
Opinion of Counsel and Limited Partner Approval
Our general partner is not required to obtain an opinion of counsel that an amendment will not result in a loss of limited
liability to the limited partners or result in our being treated as an entity for federal income tax purposes in connection with
any of the amendments described under “—No Limited Partner Approval”. No other amendments to our partnership
agreement will become effective without the approval of holders of at least 90% of the outstanding common units voting as a
single class unless we first obtain an opinion of counsel to the effect that the amendment will not affect the limited liability
under applicable law of any of our limited partners. Finally, our general partner may consummate any merger without the
prior approval of our unitholders if we are the surviving entity in the transaction, the transaction would not result in a
material amendment to the partnership agreement, each of our partnership security will be an identical partnership security of
our partnership following the transaction, the partnership securities to be issued do not exceed 20% of our outstanding
partnership securities immediately prior to the transaction and our general partner has received an opinion of counsel
regarding certain limited liability and tax matters.
In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or
preferences of any class or series of partnership interests in relation to other classes of partnership interests will require the
approval of at least a majority of the class or series of partnership interests so affected. Any amendment that reduces the
voting percentage required to take any action must be approved by the affirmative vote of limited partners whose aggregate
outstanding units constitute not less than the voting requirement sought to be reduced.
Merger, Sale or Other Disposition of Assets
A merger or consolidation of us requires the prior consent of our general partner. However, our general partner has no
duty or obligation to consent to any merger or consolidation and may decline to do so free of any duty or obligation
whatsoever to us or the limited partners, including any duty to act in good faith or in the best interest of us or the limited
partners.
In addition, our partnership agreement generally prohibits our general partner, without the prior approval of the holders
of common units representing a unit majority, from causing us to, among other things, sell, exchange, or otherwise dispose
of all or substantially all of our assets in a single transaction or a series of related transactions, including by way of merger,
consolidation, or other combination, or approving on our behalf the sale, exchange, or other disposition of all or substantially
all of the assets of our subsidiaries. Our general partner may, however, mortgage, pledge, hypothecate, or grant a security
interest in all or substantially all of our assets without that approval. Our general partner may also sell all or substantially all
of our assets under a foreclosure or other realization upon those encumbrances without that approval.
If the conditions specified in our partnership agreement are satisfied, our general partner may convert us or any of our
subsidiaries into a new limited liability entity or merge us or any of our subsidiaries into, or convey some or all of our assets
to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change in our legal form into
another limited liability entity. The limited partners are not entitled to dissenters’ rights of appraisal under our partnership
agreement or applicable Delaware law in the event of a conversion, merger or consolidation, a sale of substantially all of our
assets, or any other transaction or event.
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Termination and Dissolution
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We will continue as a limited partnership until terminated under our partnership agreement. We will dissolve upon:
the election of our general partner to dissolve us, if approved by the holders of common units representing a unit
majority;
there being no limited partners, unless we are continued without dissolution in accordance with applicable
Delaware law;
the entry of a decree of judicial dissolution of our partnership; or
the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general
partner other than by reason of a transfer of its general partner interest in accordance with our partnership
agreement or withdrawal or removal following approval and admission of a successor.
Upon a dissolution under the fourth bullet point above, the holders of a unit majority may also elect, within specific time
limitations, to continue our business on the same terms and conditions described in our partnership agreement by appointing
as a successor general partner an entity approved by the holders of common units representing a unit majority, subject to our
receipt of an opinion of counsel to the effect that:
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the action would not result in the loss of limited liability of any limited partner; and
neither our partnership, our operating company nor any of our other subsidiaries would be treated as an association
taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of
that right to continue (to the extent not already so treated or taxed).
Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are continued as a new limited partnership, the liquidator authorized to wind up our
affairs will, acting with all of the powers of our general partner that are necessary or appropriate, liquidate our assets and
apply the proceeds of the liquidation as described in “How We Make Cash Distributions—Distributions of Cash Upon
Liquidation”. The liquidator may defer liquidation or distribution of our assets for a reasonable period of time or distribute
assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our partners.
Withdrawal or Removal of Our General Partner
Our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90
days’ written notice, and that withdrawal will not constitute a violation of our partnership agreement. In addition, our
partnership agreement permits our general partner in some instances to sell or otherwise transfer all of its general partner
interest in us without the approval of the limited partners.
Upon withdrawal of our general partner under any circumstances, other than as a result of a transfer by our general
partner of all or a part of its general partner interest in us, the holders of a majority of the outstanding common units may
select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel
regarding limited liability and tax matters cannot be obtained, we will be dissolved, wound up, and liquidated, unless within
a specified period of time after that withdrawal, the holders of a unit majority agree in writing to continue our business and
to appoint a successor general partner. Please read “—Termination and Dissolution.”
Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66
2/3% of the outstanding common units, voting together as a single class, including units held by our general partner and its
affiliates, and we receive an opinion of counsel regarding limited liability and tax matters. Any removal of our general
partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the
outstanding common units. The ownership of more than 33 1/3% of the outstanding
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common units by our general partner and its affiliates would give them the practical ability to prevent our general partner’s
removal.
Our partnership agreement also provides that if our general partner is removed as our general partner under
circumstances where cause does not exist and no common units held by our general partner and its affiliates are voted in
favor of that removal, our general partner will have the right to convert its general partner interest and its incentive
distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of the
interests at the time.
In the event of removal of our general partner under circumstances where cause exists or withdrawal of our general
partner where that withdrawal violates our partnership agreement, a successor general partner will have the option to
purchase the general partner interest and incentive distribution rights of the departing general partner for a cash payment
equal to the fair market value of those interests. Under all other circumstances where the general partner withdraws or is
removed by the limited partners, the departing general partner will have the option to require the successor general partner to
purchase the general partner interest of the departing general partner and its incentive distribution rights for their fair market
value. In each case, this fair market value will be determined by agreement between the departing general partner and the
successor general partner. If no agreement is reached, an independent investment banking firm or other independent expert
selected by the departing general partner and the successor general partner will determine the fair market value. Or, if the
departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement
of the experts selected by each of them will determine the fair market value.
If the option described above is not exercised by either the departing general partner or the successor general partner, the
departing general partner’s general partner interest and its incentive distribution rights will automatically convert into
common units with a value equal to the fair market value of those interests as determined by an investment banking firm or
other independent expert selected in the manner described in the preceding paragraph.
In addition, we will be required to reimburse the departing general partner for all amounts due the departing general
partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the
termination of any employees employed by the departing general partner or its affiliates for our benefit.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a person or group from
attempting to remove Global GP LLC as our general partner or otherwise change management. If any person or group other
than our general partner and its affiliates acquires beneficial ownership of 20% or more of the outstanding partnership
securities, that person or group loses voting rights on all of its partnership securities. This loss of voting rights does not apply
to any person or group that acquires the partnership securities from our general partner or its affiliates and any transferees of
that person or group approved by our general partner or to any person or group who acquires the partnership securities with
the prior approval of the board of directors of our general partner.
Our partnership agreement also provides that if our general partner is removed under circumstances where cause does
not exist and no units held by our general partner and its affiliates are voted in favor of that removal, our general partner will
have the right to convert its general partner interest and its incentive distribution rights into common units or to receive cash
in exchange for those interests.
Limited Call Right
If at any time our general partner and its affiliates own more than 80% of the then-issued and outstanding partnership
securities of any class (other than Series A Preferred Units), our general partner will have the right, which it may assign in
whole or in part to any of its affiliates or to us, to acquire all, but not less than all, of the remaining partnership securities of
the class held by unaffiliated persons. The purchase price in the event of such an acquisitions is the greater of:
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the highest price paid by either of our general partner or any of its affiliates for any partnership securities of the
class purchased within the 90 days preceding the date on which our general partner first mails notice of its election
to purchase those partnership securities; and
the average of the daily closing prices of the partnership securities of such class over the 20 trading days preceding
the date three days before the date the notice is mailed.
As a result of our general partner’s right to purchase outstanding partnership securities, a holder of partnership securities
may have his partnership securities purchased at an undesirable time or price. The tax consequences to a unitholder of the
exercise of this call right are the same as a sale by that unitholder of his common units in the market. The repurchase right
described in this section does not apply to Series A Preferred Units.
Meetings; Voting
Except as described below regarding a person or group owning 20% or more of any partnership securities then
outstanding, unitholders or assignees who are record holders of units on the record date are entitled to notice of, and to vote
at, meetings of our limited partners and to act upon matters for which approvals may be solicited. Common units that are
owned by an assignee who is a record holder, but who has not yet been admitted as a limited partner, will be voted by our
general partner at the written direction of the record holder. Absent direction of this kind, the common units will not be
voted, except that, in the case of common units held by our general partner on behalf of non-citizen assignees, our general
partner will distribute the votes on those common units in the same ratios as the votes of limited partners on other units are
cast.
Our general partner does not anticipate that any meeting of limited partners will be called in the foreseeable future. Any
action that is required or permitted to be taken by the limited partners may be taken either at a meeting of the limited partners
or without a meeting if consents in writing describing the action so taken are signed by holders of the number of partnership
securities necessary to authorize or take that action at a meeting. Meetings of the limited partners may be called by our
general partner or by limited partners owning at least 20% of the outstanding limited partner interests of the class for which a
meeting is proposed. Limited partners may vote either in person or by proxy at meetings. The holders of a majority of the
outstanding partnership securities of the class, classes or series entitled to vote and be present for which a meeting has been
called, represented in person or by proxy, will constitute a quorum unless any action by the limited partners requires
approval by holders of a greater percentage of the partnership securities in which case the quorum will be the greater
percentage.
Each record holder of a common unit has a vote according to his percentage interest in us, although additional limited
partner interests having special voting rights could be issued. Please read “—Issuance of Additional Securities.” However, if
at any time any person or group, other than our general partner and its affiliates, or a direct or subsequently approved
transferee of our general partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20% or more of any class
of partnership securities then outstanding, that person or group will lose voting rights on all of its partnership securities and
the partnership securities may not be voted on any matter and will not be considered to be outstanding when sending notices
of a meeting of limited partners, calculating required votes, determining the presence of a quorum, or for other similar
purposes. Common units held in nominee or street name account will be voted by the broker or other nominee in accordance
with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides
otherwise.
Any notice, demand, request, report, or proxy material required or permitted to be given or made to record holders of
common units under our partnership agreement will be delivered to the record holder by us or by the transfer agent.
Non-Citizen Assignees; Redemption
If we are or become subject to federal, state, or local laws or regulations that, in the reasonable determination of our
general partner, create a substantial risk of cancellation or forfeiture of any property in which we have an interest in because
of the nationality, citizenship, or other related status of any limited partner or assignee, we may redeem the limited partner
interest held by the limited partner or assignee at their current market price. In order to avoid any cancellation or forfeiture,
our general partner may require each limited partner or assignee to furnish information about his nationality, citizenship, or
related status. If a limited partner or assignee fails to furnish
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information about his nationality, citizenship, or other related status within 30 days after a request for the information or our
general partner determines after receipt of the information that the limited partner or assignee is not an eligible citizen, the
limited partner or assignee may be treated as a non-citizen assignee. In addition to other limitations on the rights of an
assignee that is not a substituted limited partner, a non-citizen assignee does not have the right to direct the voting of his
limited partner interests and may not receive distributions in kind upon our liquidation.
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Exhibit 4.5
DESCRIPTION OF THE REGISTRANT’S PREFERRED UNITS
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
General
Our 9.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units (“Series A Preferred
Units”) are listed on the New York Stock Exchange (the “NYSE”) under the symbol “GLP pr A.”
We have appointed American Stock Transfer & Trust Company, LLC as the paying agent (the “Paying Agent”),
and the registrar and transfer agent (the “Registrar and Transfer Agent”), for the Series A Preferred Units. The address of the
Paying Agent and the Registrar and Transfer Agent is 6201 15th Avenue, Brooklyn, New York, 11219.
Ranking
The Series A Preferred Units, with respect to quarterly distributions and amounts payable upon the liquidation,
winding-up and dissolution of our affairs, rank:
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senior to our common units, the incentive distribution rights and to each other class or series of limited partner
interests or other equity securities established after the original issue date of the Series A Preferred Units that is not
expressly made senior to or on parity with the Series A Preferred Units as to the payment of distributions and
amounts payable on a liquidation event (individually and collectively, the “Junior Securities”);
on parity with each other and any class or series of limited partner interests or other equity securities established
after the original issue date of the Series A Preferred Units with terms expressly providing that such class or series
ranks on parity with the Series A Preferred Units as to the payment of distributions or amounts payable upon a
liquidation event, as applicable (individually and collectively, but excluding Senior Securities (as defined below),
the “Parity Securities”);
junior to any class or series of limited partner interests or equity securities established after the original issue date of
the Series A Preferred Units with terms expressly made senior to the Series A Preferred Units as to the payment of
distributions or amounts payable upon a liquidation event (individually and collectively, “Senior Securities”); and
junior to all of our existing and future indebtedness and other liabilities with respect to assets available to satisfy
claims against us.
Under our partnership agreement, we may issue Junior Securities from time to time in one or more series without
the consent of the holders of the Series A Preferred Units. The board of directors of our general partner has the authority to
determine the designations, preferences, rights, powers, and duties of any such series before the issuance of any units of that
series. The board of directors of our general partner will also determine the number of units constituting each series of
securities. Our ability to issue additional Parity Securities in certain circumstances or Senior Securities is limited as
described under “—Voting Rights.”
Liquidation Rights
Any amount distributed by us upon our liquidation will be made to our partners in accordance with their respective
positive capital account balances. The holders of outstanding Series A Preferred Units will first be specially allocated items
of our gross income and gain in a manner designed to cause, in the event of any liquidation, dissolution, or winding up of our
affairs (whether voluntary or involuntary), such holders to have a positive capital balance equal to the liquidation preference
of $25.00 per Series A Preferred Unit. If the amount of our gross income and gain
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available to be specially allocated to the holders of outstanding Series A Preferred Units is not sufficient to cause the capital
account of a Series A Preferred Unit to equal the liquidation preference of a Series A Preferred Unit, then the amount that a
holder of Series A Preferred Units would receive upon liquidation may be less than the Series A Preferred Unit liquidation
preference. Any accumulated and unpaid distributions on the Series A Preferred Units will be paid prior to any distributions
in liquidation made in accordance with capital account balances. The rights of the holders of Series A Preferred Units to
receive the liquidation preference will be subject to the rights of the holders of any Senior Securities and the proportional
rights of holders of Parity Securities in liquidation.
Voting Rights
Except as set forth in our partnership agreement (as described below) or as otherwise required by Delaware law, the
Series A Preferred Units have no voting rights.
Unless we have received the affirmative vote or consent of the holders of at least two-thirds of the outstanding
Series A Preferred Units, voting as a separate class, we may not adopt any amendment to our partnership agreement that has
a material adverse effect on the terms of the Series A Preferred Units. For the avoidance of doubt, for purposes of this voting
requirement, any amendment to our partnership agreement (i) relating to the issuance of additional limited partner interests
(subject to the voting rights regarding the issuance of Parity Securities or Senior Securities discussed below) and (ii) in
connection with a merger or another transaction in which we are the surviving entity and the Series A Preferred Units remain
outstanding with the terms thereof materially unchanged in any respect adverse to the holders of Series A Preferred Units,
will be deemed to not materially adversely affect the terms of the holders of Series A Preferred Units.
In addition, unless we have received the affirmative vote or consent of the holders of at least two-thirds of the
outstanding Series A Preferred Units, voting as a class together with holders of any Parity Securities upon which like voting
rights have been conferred and are exercisable, we may not:
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create or issue any Parity Securities (including any additional Series A Preferred Units) if the cumulative
distributions payable on then outstanding Series A Preferred Units (or Parity Securities, if applicable) are in arrears;
create or issue any Senior Securities; or
declare or pay any distributions to our common unitholders out of capital surplus.
On any matter on which the holders of the Series A Preferred Units are entitled to vote as a class, such holders will
be entitled to one vote per Series A Preferred Unit.
Series A Preferred Units held in nominee or street name account will be voted by the broker or other nominee in
accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and its nominee
provides otherwise.
Distributions
General
Holders of Series A Preferred Units are entitled to receive, when, as, and if declared by our general partner out of
legally available funds for such purpose, cumulative quarterly cash distributions. Distributions on the Series A Preferred
Units are paid out of our available cash with respect to the quarter ended immediately preceding the applicable Distribution
Payment Date (as defined below).
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Distribution Rate
Distributions on Series A Preferred Units are cumulative from the date of original issue and are payable quarterly in
arrears (as described under “—Distribution Payment Dates”), when, as, and if declared by our general partner out of legally
available funds for such purpose.
The initial distribution rate for the Series A Preferred Units from and including the date of original issue to, but
excluding, August 15, 2023 (the “Fixed Rate Period”) is 9.75% per annum of the $25.00 liquidation preference per unit
(equal to $2.4375 per unit per annum). On and after August 15, 2023 (the “Floating Rate Period”), distributions on the
Series A Preferred Units will accumulate for each distribution period at a percentage of the $25.00 liquidation preference
equal to an annual floating rate of the three-month LIBOR plus a spread of 6.774% per annum.
The distribution rate for each distribution period in the Floating Rate Period will be determined by the calculation
agent using three-month LIBOR as in effect on the second London banking day prior to the beginning of the distribution
period, which date is the “distribution determination date” for the distribution period. The calculation agent then will add the
spread of 6.774% per annum to three-month LIBOR as determined on the distribution determination date. Absent manifest
error, the calculation agent's determination of the distribution rate for a distribution period for the Series A Preferred Units
will be binding and conclusive on holders, the transfer agent, and us. A “London banking day” is any day on which dealings
in deposits in U.S. dollars are transacted in the London interbank market.
The term “three-month LIBOR” means the London interbank offered rate for deposits in U.S. dollars having an
index maturity of three months in amounts of at least $1,000,000, as that rate appears on the display designated on the
Reuters Screen LIBOR01 Page (or any successor or replacement page) at approximately 11:00 a.m., London time, on the
relevant distribution determination date, provided that:
(i) If no offered rate appears on the Reuters screen page on the relevant distribution determination date at
approximately 11:00 a.m., London time, then the calculation agent, after consultation with us, will select four major
banks in the London interbank market and will request each of their principal London offices to provide a quotation
of the rate at which three-month deposits in U.S. dollars in amounts of at least $1,000,000 are offered by it to prime
banks in the London interbank market, on that date and at that time, that is representative of single transactions at
that time. If at least two quotations are provided, three-month LIBOR will be the arithmetic average (rounded
upward if necessary to the nearest 0.00001 of 1%) of the quotations provided.
(ii) Otherwise, the calculation agent will select three major banks in New York City and will request each
of them to provide a quotation of the rate offered by it at approximately 11:00 a.m., New York City time, on the
distribution determination date for loans in U.S. dollars to leading European banks having an index maturity of
three months for the applicable distribution period in an amount of at least $1,000,000 that is representative of
single transactions at that time. If three quotations are provided, three-month LIBOR will be the arithmetic average
(rounded upward if necessary to the nearest 0.00001 of 1%) of the quotations provided.
(iii) Otherwise, the calculation agent, after consulting such sources as it deems comparable to any of the
foregoing quotations or display page, or any such source as it deems reasonable from which to estimate three-month
LIBOR or any of the foregoing lending rates, shall determine three-month LIBOR for the applicable distribution
period in its sole discretion.
Notwithstanding the foregoing clauses (i), (ii) and (iii):
(A) If the calculation agent determines on the relevant distribution determination date that the LIBOR base
rate has been discontinued, then the calculation agent will use a substitute or successor base rate that it has
determined in its sole discretion is most comparable to the LIBOR base rate, provided that if the calculation agent
determines there is an industry-accepted substitute or successor base rate, then the calculation agent shall use such
substitute or successor base rate; and
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(B) If the calculation agent has determined a substitute or successor base rate in accordance with the
foregoing, the calculation agent in its sole discretion may determine what business day convention to use, the
definition of business day, the distribution determination date to be used and any other relevant methodology for
calculating such substitute or successor base rate.
We will appoint a calculation agent (other than us or our affiliates) for the Series A Preferred Units prior to the
commencement of the Floating Rate Period and will keep a record of such appointment at our principal offices, which will
be available to any unitholder upon request.
Distribution Payment Dates
The “Distribution Payment Dates” for the Series A Preferred Units are February 15, May 15, August 15 and
November 15. Distributions are paid to holders of record as of the opening of business on the February 1, May 1, August 1
or November 1 next preceding the Distribution Payment Date. Distributions accumulate in each such period from and
including the preceding Distribution Payment Date or the initial issue date, as the case may be, to but excluding the
applicable Distribution Payment Date for such period, and distributions accrue on accumulated distributions at the applicable
distribution rate. If any Distribution Payment Date otherwise would fall on a day that is not a Business Day, declared
distributions will be paid on the immediately succeeding Business Day without the accumulation of additional distributions.
Distributions on the Series A Preferred Units will be payable based on a 360-day year consisting of twelve 30-day periods.
“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the
government of the United States of America, the Commonwealth of Massachusetts or the State of New York shall not be
regarded as a Business Day.
Payment of Distributions
Not later than 5:00 p.m., New York City time, on each Distribution Payment Date, we pay quarterly distributions,
if any, on the Series A Preferred Units that have been declared by our general partner to the holders of such Series A
Preferred Units as such holders’ names appear on our unit transfer books maintained by the Registrar and Transfer Agent on
the applicable record date.
So long as the Series A Preferred Units are held of record by the nominee of the Securities Depositary (as defined
below), declared distributions are paid to the Depository Trust Company (and its successors or assigns or any other securities
depositary selected by us, the “Securities Depositary”) in same-day funds on each Distribution Payment Date. The Securities
Depositary credits accounts of its participants in accordance with the Securities Depositary’s normal procedures. The
participants are responsible for holding or disbursing such payments to beneficial owners of the Series A Preferred Units in
accordance with the instructions of such beneficial owners.
No distribution may be declared or paid or set apart for payment on any Junior Securities (other than a distribution
payable solely in Junior Securities) unless full cumulative distributions have been or contemporaneously are being paid or
provided for on all outstanding Series A Preferred Units and any Parity Securities through the most recent respective
Distribution Payment Dates. Accumulated distributions in arrears for any past distribution period may be declared by the
general partner and paid on any date fixed by the general partner, whether or not a Distribution Payment Date, to holders of
the Series A Preferred Units on the record date for such payment, which may not be less than 10 days before such payment
date.
Subject to the next succeeding sentence, if all accumulated distributions in arrears on all outstanding Series A
Preferred Units and any Parity Securities have not been declared and paid, or sufficient funds for the payment thereof have
not been set apart, payment of accumulated distributions in arrears will be made in order of their respective Distribution
Payment Dates, commencing with the earliest Distribution Payment Date. If less than all distributions payable with respect
to all Series A Preferred Units and any Parity Securities are paid, any partial payment will be made pro rata with respect to
the Series A Preferred Units and any Parity Securities entitled to a distribution payment at such time in proportion to the
aggregate amounts remaining due in respect of such Series A Preferred Units and Parity Securities at such time. Holders of
the Series A Preferred Units are not entitled to any distribution, whether payable in cash, property or units, in excess of full
cumulative distributions. Except insofar as distributions accrue on the amount of any accumulated and unpaid distributions
no interest or sum of money in lieu of interest will be payable in respect of any distribution payment which may be in arrears
on the Series A Preferred Units.
4
Change of Control
Optional Redemption upon a Change of Control
Upon the occurrence of a Change of Control (as defined below), we may, at our option, redeem the Series A
Preferred Units in whole or in part within 120 days after the first date on which such Change of Control occurred (the
“Change of Control Redemption Period”), by paying the liquidation preference of $25.00 per Series A Preferred Unit, plus
all accumulated and unpaid distributions to, but excluding, the redemption date, whether or not declared. If, prior to the
Change of Control Conversion Date (as defined below), we exercise our right to redeem Series A Preferred Units as
described in the immediately preceding sentence or as described below under “—Redemption,” holders of the Series A
Preferred Units we have elected to redeem will not have the conversion right described below under “—Conversion Right
upon a Change of Control.” Any such redemption would be effected only out of funds legally available for such purpose.
“Change of Control” means the occurrence of any of the following events after the original issue date of the
Series A Preferred Units:
·
·
the direct or indirect lease, sale, transfer, conveyance or other disposition (other than by way of merger,
consolidation or business combination), in one or a series of related transactions, of all or substantially all of the
properties or assets of us and our subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)
(3) of the Securities Exchange Act of 1934; or
the consummation of any transaction (including, without limitation, any merger, consolidation or business
combination), the result of which is that any person (as defined above), other than a Permitted Holder (as defined
below), becomes the beneficial owner, directly or indirectly, of more than 50% of the voting interests of our general
partner, measured by voting power rather than percentage of interests.
“Permitted Holder” means Richard Slifka and Eric Slifka (or other immediate family members of Alfred Slifka or
the foregoing or related family trusts or other persons which are controlled by Richard Slifka and/or Eric Slifka).
Conversion Right upon a Change of Control
Upon the occurrence of a Change of Control, each holder of Series A Preferred Units will have the right (unless,
during the Change of Control Redemption Period, we provide notice of our election to redeem Series A Preferred Units as
described above under “—Optional Redemption upon a Change of Control” or below under “—Redemption”) to convert (the
“Series A Change of Control Conversion”) some or all of the Series A Preferred Units held by such holder on the Change of
Control Conversion Date into a number of our common units per Series A Preferred Unit to be converted equal (the
“Common Unit Conversion Consideration”) to the lesser of:
·
·
the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any
accumulated and unpaid distributions to, but excluding, the Change of Control Conversion Date (unless the Change
of Control Conversion Date is after a record date for a Series A Preferred Unit distribution payment and prior to the
corresponding Series A Preferred Unit distribution payment date, in which case no additional amount for such
accumulated and unpaid distribution will be included in this sum) by (ii) the Common Unit Price (as defined
below), and
2.7100, which is the quotient obtained by dividing (i) the $25.00 liquidation preference by (ii) one-half of the
closing price of the common units on the NYSE on July 30, 2018, subject, in each case, to certain adjustments and
to provisions as the general partner determines to be equitable in connection with (i) the receipt of any Alternative
Conversion Consideration (as defined below) and (ii) splits, combinations and distributions in the form of equity
issuances, each as described in greater detail in our partnership agreement.
In the case of a Change of Control pursuant to which our common units will be converted into cash, securities or
other property or assets (including any combination thereof) (the “Alternative Conversion Consideration”), a holder
5
of Series A Preferred Units electing to exercise its Change of Control Conversion Right (as defined below) will receive upon
conversion of such Series A Preferred Units elected by such holder the kind and amount of such consideration that such
holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of our
common units equal to the Common Unit Conversion Consideration immediately prior to the effective time of the Change of
Control, which we refer to as the Alternative Conversion Consideration; provided, however, that if the holders of our
common units have the opportunity to elect the form of consideration to be received in the Change of Control, the
consideration that the holders of Series A Preferred Units electing to exercise their Change of Control Conversion Right will
receive will be the form and proportion of the aggregate consideration elected by the holders of our common units who
participate in the determination (based on the weighted average of elections) and will be subject to any limitations to which
all holders of our common units are subject, including, without limitation, pro rata reductions applicable to any portion of the
consideration payable in the Change of Control. We will not issue fractional common units upon the conversion of the
Series A Preferred Units. Instead, we will pay the cash value of such fractional units.
If we provide a redemption notice prior to the expiration of the Change of Control Redemption Period, whether
pursuant to our special optional redemption right in connection with a Change of Control as described under “—Optional
Redemption upon a Change of Control” or our optional redemption rights as described below under “—Redemption,”
holders of Series A Preferred Units will not have any right to convert the Series A Preferred Units that we have elected to
redeem and any Series A Preferred Units subsequently selected for redemption that have been tendered for conversion
pursuant to the Change of Control Conversion Right will be redeemed on the related redemption date instead of converted on
the Change of Control Conversion Date.
Within five days following the expiration of the Change of Control Redemption Period (or, if we waive our right to
redeem the Series A Preferred Units prior to the expiration of the Change of Control Redemption Period, within five days
following the date of such waiver), we will provide to the holders of Series A Preferred Units written notice (the “Change of
Control Conversion Right Notice”) of occurrence of the Change of Control that describes the resulting Change of Control
Conversion Right. The Change of Control Conversion Right Notice will state the following:
·
·
·
·
·
·
·
·
·
the events constituting the Change of Control;
the date of the Change of Control;
the date on which the Change of Control Redemption Period expired or was waived;
the last date on which the holders of Series A Preferred Units may exercise their Change of Control Conversion
Right;
the method and period for calculating the Common Unit Price;
the Change of Control Conversion Date;
if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per Series A
Preferred Unit;
the name and address of the Paying Agent; and
the procedure that the holders of Series A Preferred Units must follow to exercise the Change of Control
Conversion Right.
We will issue a press release for publication through a news or press organization as is reasonably expected to
broadly disseminate the relevant information to the public, or post notice on our website, in any event prior to the opening of
business on the first Business Day following any date on which we provide the Change of Control Conversion Right Notice
to the holders of Series A Preferred Units.
6
Holders of Series A Preferred Units that choose to exercise their Change of Control Conversion Right will be
required prior to the close of business on the third Business Day preceding the Change of Control Conversion Date, to notify
us of the number of Series A Preferred Units to be converted and otherwise to comply with any applicable procedures
contained in the Change of Control Conversion Right Notice or otherwise required by the Securities Depositary for effecting
the conversion.
“Change of Control Conversion Right” means the right of a holder of Series A Preferred Units to convert some or
all of the Series A Preferred Units held by such holder on the Change of Control Conversion Date into a number of our
common units per Series A Preferred Unit pursuant to the conversion provisions in our partnership agreement.
“Change of Control Conversion Date” means the date fixed by our general partner, in its sole discretion, as the date
the Series A Preferred Units are to be converted into common units, which will be a Business Day that is no fewer than
20 days nor more than 35 days after the date on which we provide the Change of Control Conversion Right Notice to holders
of the Series A Preferred Units.
“Common Unit Price” means (i) the amount of cash consideration per common unit, if the consideration to be
received in the Change of Control by the holders of our common units is solely cash; and (ii) the average of the closing
prices for our common units on the NYSE for the ten consecutive trading days immediately preceding, but not including, the
Change of Control Conversion Date, if the consideration to be received in the Change of Control by the holders of our
common units is other than solely cash.
Redemption
Optional Redemption on or after August 15, 2023
Any time on or after August 15, 2023, we may redeem, at our option, in whole or in part, the Series A Preferred
Units at a redemption price in cash equal to $25.00 per Series A Preferred Unit plus an amount equal to all accumulated and
unpaid distributions thereon to, but excluding, the date of redemption, whether or not declared. We may undertake multiple
partial redemptions. We may also redeem the Series A Preferred Units under the terms set forth under “—Change of Control
—Optional Redemption upon a Change of Control.” Any such redemption would be effected only out of funds legally
available for such purpose and would be subject to compliance with the provisions of the instruments governing our
outstanding indebtedness.
Redemption Procedures
Any optional redemption shall be effected only out of funds legally available for such purpose. We will give written
notice of any redemption not less than 30 days and not more than 60 days before the scheduled date of redemption, to the
holders of any Series A Preferred Units to be redeemed as such holders’ names appear on our unit transfer books maintained
by the Registrar and Transfer Agent at the address of such holders shown therein. Such notice shall state: (i) the redemption
date, (ii) the number of Series A Preferred Units to be redeemed and, if less than all outstanding Series A Preferred Units are
to be redeemed, the number (and, in the case of Series A Preferred Units in certificated form, the identification) of Series A
Preferred Units to be redeemed from such holder, (iii) the redemption price, (iv) the place where any Series A Preferred
Units in certificated form are to be redeemed and shall be presented and surrendered for payment of the redemption price
therefor, and (v) that distributions on the Series A Preferred Units to be redeemed will cease to accumulate from and after
such redemption date.
If fewer than all of the outstanding Series A Preferred Units are to be redeemed, the number of Series A Preferred
Units to be redeemed will be determined by us, and such Series A Preferred Units will be redeemed by such method of
selection as the Securities Depositary shall determine, pro rata or by lot, with adjustments to avoid redemption of fractional
units. So long as all Series A Preferred Units are held of record by the nominee of the Securities Depositary, we will give
notice, or cause notice to be given, to the Securities Depositary of the number of Series A Preferred Units to be redeemed,
and the Securities Depositary will determine the number of Series A Preferred Units to be redeemed from the account of
each of its participants holding such Series A Preferred Units in its participant account. Thereafter, each participant will
select the number of Series A Preferred Units to be redeemed
7
from each beneficial owner for whom it acts (including the participant, to the extent it holds Series A Preferred Units for its
own account). A participant may determine to redeem Series A Preferred Units from some beneficial owners (including the
participant itself) without redeeming Series A Preferred Units from the accounts of other beneficial owners. Any Series A
Preferred Units not redeemed will remain outstanding and entitled to all the rights and preferences of Series A Preferred
Units under our partnership agreement.
So long as the Series A Preferred Units are held of record by the nominee of the Securities Depositary, the
redemption price will be paid by the Paying Agent to the Securities Depositary on the redemption date. The Securities
Depositary’s normal procedures provide for it to distribute the amount of the redemption price in same-day funds to its
participants who, in turn, are expected to distribute such funds to the persons for whom they are acting as agent.
If we give or cause to be given a notice of redemption, then we will deposit with the Paying Agent funds sufficient
to redeem the Series A Preferred Units as to which notice has been given by 10:00 a.m., New York City time, on the date
fixed for redemption, and will give the Paying Agent irrevocable instructions and authority to pay the redemption price to the
holder or holders thereof upon surrender or deemed surrender (which will occur automatically if the certificate representing
such Series A Preferred Units is issued in the name of the Securities Depositary or its nominee) of the certificates therefor. If
a notice of redemption shall have been given, then from and after the date fixed for redemption, unless we default in
providing funds sufficient for such redemption at the time and place specified for payment pursuant to the notice, all
distributions on such Series A Preferred Units will cease to accumulate and all rights of holders of such Series A Preferred
Units as limited partners will cease, except the right to receive the redemption price, including an amount equal to
accumulated and unpaid distributions to the date fixed for redemption, whether or not declared. The holders of Series A
Preferred Units will have no claim to the interest income, if any, earned on such funds deposited with the Paying Agent. Any
funds deposited with the Paying Agent hereunder by us for any reason, including, but not limited to, redemption of Series A
Preferred Units, that remain unclaimed or unpaid after one year after the applicable redemption date or other payment date,
shall be, to the extent permitted by law, repaid to us upon our written request, after which repayment the holders of the
Series A Preferred Units entitled to such redemption or other payment shall have recourse only to us.
If only a portion of the Series A Preferred Units represented by a certificate has been called for redemption, upon
surrender of the certificate to the Paying Agent (which will occur automatically if the certificate representing such Series A
Preferred Units is registered in the name of the Securities Depositary or its nominee), we will issue and the Paying Agent
will deliver to the holder of such Series A Preferred Units a new certificate (or adjust the applicable book-entry account)
representing the number of Series A Preferred Units represented by the surrendered certificate that have not been called for
redemption.
Notwithstanding any notice of redemption, there will be no redemption of any Series A Preferred Units called for
redemption until funds sufficient to pay the full redemption price of such Series A Preferred Units, including all accumulated
and unpaid distributions to, but excluding, the date of redemption, whether or not declared, have been deposited by us with
the Paying Agent.
We may from time to time purchase Series A Preferred Units, subject to compliance with all applicable securities
and other laws. We have no obligation, or any present plan or intention, to purchase any Series A Preferred Units. Any
Series A Preferred Units that we redeem or otherwise acquire will be cancelled.
Notwithstanding the foregoing, in the event that full cumulative distributions on the Series A Preferred Units and
any Parity Securities have not been paid or declared and set apart for payment, we may not repurchase, redeem or otherwise
acquire, in whole or in part, any Series A Preferred Units or Parity Securities except pursuant to a purchase or exchange offer
made on the same relative terms to all holders of Series A Preferred Units and any Parity Securities. Common units and any
other Junior Securities may not be redeemed, repurchased or otherwise acquired by us unless full cumulative distributions on
the Series A Preferred Units and any Parity Securities for all prior and the then-ending distribution periods have been paid or
declared and set apart for payment.
No Limited Call Right
Our general partner’s limited call right does not apply to the Series A Preferred Units.
8
No Sinking Fund
The Series A Preferred Units do not have the benefit of any sinking fund.
No Fiduciary Duty
Notwithstanding anything to the contrary in the partnership agreement or any duty existing at law, in equity or
otherwise, we, and the officers and directors of our general partner, do not owe any duties, including fiduciary duties, or have
any liabilities to holders of the Series A Preferred Units.
Book-Entry System
All Series A Preferred Units are represented by a single certificate issued to the Securities Depositary, and
registered in the name of its nominee (Cede & Co.). The Series A Preferred Units will continue to be represented by a single
certificate registered in the name of the Securities Depositary or its nominee, and no holder of the Series A Preferred Units is
entitled to receive a certificate evidencing such Series A Preferred Units unless otherwise required by law or the Securities
Depositary gives notice of its intention to resign or is no longer eligible to act as such and we have not selected a substitute
Securities Depositary within 60 calendar days thereafter. Payments and communications made by us to holders of the
Series A Preferred Units are duly made by making payments to, and communicating with, the Securities Depositary.
Accordingly, unless certificates are available to holders of the Series A Preferred Units, each purchaser of Series A Preferred
Units must rely on (i) the procedures of the Securities Depositary and its participants to receive distributions, any redemption
price, liquidation preference and notices, and to direct the exercise of any voting rights, with respect to such Series A
Preferred Units and (ii) the records of the Securities Depositary and its participants to evidence its ownership of such
Series A Preferred Units.
So long as the Securities Depositary (or its nominee) is the sole holder of the Series A Preferred Units, no beneficial
holder of the Series A Preferred Units will be deemed to be a holder of Series A Preferred Units. The Depository Trust
Company, the initial Securities Depositary, is a New York-chartered limited purpose trust company that performs services
for its participants, some of whom (and/or their representatives) own the Depository Trust Company. The Securities
Depositary maintains lists of its participants and the positions (i.e., ownership interests) held by its participants in the
Series A Preferred Units, whether as a holder of the Series A Preferred Units for its own account or as a nominee for another
holder of the Series A Preferred Units.
Calculation Agent
We will appoint a calculation agent (other than us or our affiliates) for the Series A Preferred Units prior to the
commencement of the Floating Rate Period and will keep a record of such appointment at our principal offices, which will
be available to any unitholder upon request.
9
Exhibit 21.1
LIST OF SUBSIDIARIES OF GLOBAL PARTNERS LP
Exhibit 21.1
Entity
Alliance Energy LLC
Basin Transload, LLC
Cascade Kelly Holdings LLC
Drake Petroleum Company, Inc.
Global Companies LLC
Global Montello Group Corp.
Global Operating LLC
GLP Finance Corp.
Warex Terminals Corporation
Warren Equities, Inc.
Jurisdiction of Formation
Massachusetts
Delaware
Oregon
Massachusetts
Delaware
Delaware
Delaware
Delaware
New York
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statements and related prospectus (Form S-3 Nos. 333-222549, 333-208138 and 333-181211) of Global
Partners LP; and
(2) Registration Statement (Form S-8 Nos. 333-182346 and 333-145579), pertaining to the Global Partners LP Long Term
Incentive Plan
of our reports dated March 6, 2020, with respect to the consolidated financial statements and schedule of Global Partners LP and
the effectiveness of internal control over financial reporting of Global Partners LP, included in this Annual Report (Form 10-K) of
Global Partners LP for the year ended December 31, 2019.
/s/ Ernst & Young LLP
Boston, Massachusetts
March 6, 2020
Exhibit 31.1
CERTIFICATION
Exhibit 31.1
I, Eric Slifka, President and Chief Executive Officer of Global GP LLC, the general partner of Global Partners LP, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10‑K for the year ended December 31, 2019 of Global Partners LP;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: March 6, 2020
By:
/s/ Eric Slifka
Eric Slifka
President and Chief Executive Officer
of Global GP LLC, general partner
of Global Partners LP
Exhibit 31.2
CERTIFICATION
Exhibit 31.2
I, Daphne H. Foster, Chief Financial Officer of Global GP LLC, the general partner of Global Partners LP, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10‑K for the year ended December 31, 2019 of Global Partners LP;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a‑15(f) and 15d‑15(f)) for the registrant and have:
a)
b)
c)
d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Dated: March 6, 2020
By:
/s/ Daphne H. Foster
Daphne H. Foster
Chief Financial Officer
of Global GP LLC, general partner
of Global Partners LP
Exhibit 32.1
CERTIFICATION OF THE
CHIEF EXECUTIVE OFFICER OF
GLOBAL PARTNERS LP
PURSUANT TO 18 U.S.C. SECTION 1350
Exhibit 32.1
In connection with the accompanying report on Form 10‑K for the year ended December 31, 2019 of Global Partners LP
(the “Partnership”) and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eric Slifka,
President and Chief Executive Officer of Global GP LLC, the general partner of the Partnership, hereby certify, pursuant to
Section 906 of the Sarbanes‑Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Dated: March 6, 2020
By:
/s/ Eric Slifka
Eric Slifka
President and Chief Executive Officer
of Global GP LLC, general partner
of Global Partners LP
Exhibit 32.2
CERTIFICATION OF THE
CHIEF FINANCIAL OFFICER OF
GLOBAL PARTNERS LP
PURSUANT TO 18 U.S.C. SECTION 1350
Exhibit 32.2
In connection with the accompanying report on Form 10‑K for the year ended December 31, 2019 of Global Partners LP
(the “Partnership”) and filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daphne H.
Foster, Chief Financial Officer of Global GP LLC, the general partner of the Partnership, hereby certify, pursuant to Section 906
of the Sarbanes‑Oxley Act of 2002, that:
1.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Partnership.
Dated: March 6, 2020
By:
/s/ Daphne H. Foster
Daphne H. Foster
Chief Financial Officer
of Global GP LLC, general partner
of Global Partners LP