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Organization and Basis of Presentation
9 Months Ended
Sep. 30, 2020
Organization and Basis of Presentation  
Organization and Basis of Presentation

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 September 30, 2020, the Partnership had a portfolio of 1,542 owned, leased and/or supplied gasoline stations, including 278 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 September 30, 2020, affiliates of the General Partner, including its directors and executive officers and their affiliates, owned 5,239,245 common units, representing a 15.4% limited partner interest.

2020 Events

2029 Notes Offering and 2023 Notes Redemption— On October 7, 2020, the Partnership and GLP Finance Corp. (the “Issuers”) issued $350.0 million aggregate principal amount of 6.875% senior notes due 2029 (the “2029 Notes”) to several initial purchasers (the “2029 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 redemption of its 7.00% senior notes due 2023 (the “2023 Notes”) and to repay a portion of the borrowings outstanding under its credit agreement. See Note 8, “Debt and Financing Obligations—Senior Notes” for additional information on the 2029 Notes.

Amended Credit Agreement—On May 7, 2020, the Partnership and certain of its subsidiaries entered into the fourth amendment to third amended and restated credit agreement which, among other things, provides temporary adjustments to certain covenants and reduces the total aggregate commitment by $130.0 million. See Note 8 for additional information.

Basis of Presentation

The accompanying consolidated financial statements as of September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019 reflect the accounts of the Partnership. Upon consolidation, all intercompany balances and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and reflect all adjustments (consisting of normal recurring

adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition and operating results for the interim periods. The interim financial information, which has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), should be read in conjunction with the consolidated financial statements for the year ended December 31, 2019 and notes thereto contained in the Partnership’s Annual Report on Form 10-K. The significant accounting policies described in Note 2, “Summary of Significant Accounting Policies,” of such Annual Report on Form 10-K are the same used in preparing the accompanying consolidated financial statements, except as described in Note 19, “New Accounting Standards,” as it relates to the adoption of Accounting Standard Update (“ASU”) ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” including modifications to that standard thereafter, and now codified as Accounting Standards Codification 326 (“ASC 326”), which the Partnership adopted on January 1, 2020.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2020. The consolidated balance sheet at December 31, 2019 has been derived from the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019.

Noncontrolling Interest

The Partnership acquired a 60% interest in Basin Transload, LLC (“Basin Transload”) on February 1, 2013. After evaluating Accounting Standards Codification (“ASC”) Topic 810, “Consolidations,” 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.

In connection with the terms of an agreement between the Partnership and the minority members of Basin Transload, on September 29, 2020, the Partnership acquired the minority members’ collective 40% interest in Basin Transload (see Note 18, “Legal Proceedings” for additional information).

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. The outbreak of COVID-19 across the United States and the responses of governmental bodies (federal, state and municipal), companies and individuals, including mandated and/or voluntary restrictions to mitigate the spread of the virus, have caused a significant economic downturn. The uncertainty surrounding the short and long-term impact of COVID-19, including the inability to project the timing of an economic recovery, may have an impact on the Partnership’s use of estimates. 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 credit losses, (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 its estimates are reasonable, actual results could differ from these estimates.

Concentration of Risk

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. However, the COVID-19 pandemic has had a negative impact on gasoline demand and the extent and duration of that impact is uncertain. 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.

The following table presents the Partnership’s product sales and other revenues as a percentage of the consolidated sales for the periods presented:

Three Months Ended

Nine Months Ended

September 30,

September 30,

    

2020

    

2019

    

2020

 

2019

 

Gasoline sales: gasoline and gasoline blendstocks (such as ethanol)

 

74

%  

81

%  

70

%  

76

%  

Distillates (home heating oil, diesel and kerosene), residual oil and propane sales

 

17

%  

15

%  

24

%  

19

%  

Crude oil sales and crude oil logistics revenue

 

3

%  

%  

1

%  

1

%  

Convenience store sales, rental income and sundries

6

%  

4

%  

5

%  

4

%  

Total

 

100

%  

100

%  

100

%  

100

%  

The following table presents the Partnership’s product margin by segment as a percentage of the consolidated product margin for the periods presented:

Three Months Ended

Nine Months Ended

September 30,

September 30,

    

2020

    

2019

    

2020

 

2019

 

Wholesale segment

 

15

%  

17

%

23

%  

19

%  

Gasoline Distribution and Station Operations segment

 

84

%  

80

%

75

%  

78

%  

Commercial segment

1

%  

3

%

2

%  

3

%  

Total

 

100

%  

100

%

100

%  

100

%  

See Note 15, “Segment Reporting,” for additional information on the Partnership’s operating segments.

None of the Partnership’s customers accounted for greater than 10% of total sales for the three and nine months ended September 30, 2020 and 2019.