Global Partners LP

Good day, everyone, and welcome to the Global Partners Second Quarter 2020 Financial Results Conference Call. Today's call is being recorded. There will be an opportunity for questions at the end of the call. With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slivka, Chief Financial Officer, Ms. Daphne Foster, Chief Operating Officer, Mr. Mark Romain, and Executive Vice President and General Counsel, Mr. Edward Fanuil. At this time, I'd like to turn the call over to Mr. Fanuel for opening remarks. Please go ahead, sir.

Good morning, everyone. Thank you for joining us today. Before we begin, let me remind everyone that this morning we will be making forward-looking statements within the meaning of federal securities laws. These statements may include but are not limited to projections, beliefs, goals, estimates concerning the future financial and operational performance of global partners. Forward-looking statements are based on assumptions regarding market conditions, such as the crude oil market, business cycles, demand for petroleum products, including gasoline and gasoline blend stocks and renewable fuels, utilization of assets and facilities, weather, credit markets, the regulatory and permitting environment, and the forward product pricing curve, which could influence quarterly financial results. These statements involve significant risks and uncertainties, some of which are beyond the partnership's control, including without limitation the impact and duration of the COVID-19 pandemic. Uncertainty around the timing of an economic recovery in the United States, which will impact the demand for the products we sell and the services we provide. Uncertainty around the impact of the COVID-19 pandemic to our counterparties and our customers, and their corresponding ability to perform their obligations and or utilize the products we sell and or services we provide. Uncertainty around the impact and duration of federal, state, and municipal regulations and directives related to the COVID-19 pandemic. And assumptions that could cause actual results to differ materially from the partnership's historical experience and present expectations or projections. We believe these assumptions are reasonable given currently available information and our assessment of historical trends. Because our assumptions and future performance are subject to a wide range of business risks and uncertainties, we can provide no assurance that actual performance will fall within any guidance ranges if provided. In addition, such performance is subject to risk factors, including but not limited to those described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to any forward-looking statements that may be made during today's conference call. With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through news releases, publicly announced conference calls, or other means that will constitute public disclosure for the purposes of Regulation FD. Now please allow me to turn the call over to our President and Chief Executive Officer, Eric Sliska.

Thank you, Edward. Good morning, everyone, and thank you for joining us. Let me begin this morning by recognizing our team for their outstanding work during the past quarter. From our store associates and managers to our terminal employees to the staff in our Waltham and Brantford offices who have successfully transitioned to working remotely. While the economic environment remains challenging, I'm exceptionally proud of the way we have adapted to this new way of doing business during the pandemic. Our team has eagerly embraced our COVID-19 related procedures and safety protocols, ensuring the health and wellbeing of our guests, customers, and one another, while keeping our retail locations and terminals fully operational to deliver fuel, food, and other essential goods and services. Turning to our results, we delivered strong results in the second quarter, reflecting the extreme contango market structure. Our terminal network enabled us to take advantage of a dramatic shift in the forward product pricing curve, leading to a 73.5 million increase in wholesale product margin from the same period last year. It's important to keep in mind that in Q1 of this year, our wholesale product margin declined by nearly 30 million year over year. Those Q1 results reflected a number of factors, including the steepening forward curve caused by the rapid decline in fuel prices. Through the first half of 2020, our wholesale product margin is up about 44 million versus the same period a year earlier. In our GDSO segment, the gasoline distribution portion of the business benefited from higher retail fuel margins that more than offset a decrease in volume. We sold about 132 million fewer gallons of gasoline in the second quarter of this year than the comparable period in 2019. That reduction is attributable in part to a significant drop in commuter traffic due to COVID-19. Margins, however, were strong, increasing 62% over the same period in 2019. I know that the question on everyone's mind is, what do you expect going forward? Quite frankly, there's still too much uncertainty to give you a definitive answer. Our business, like many others across the country, is navigating the economic downturn created by the worst public health crisis in a century. As Fed Chairman Powell said last week, the economic path forward is uncertain and will depend on the ability to keep the coronavirus in check. I agree with that assessment. As we hit the midway point of summer, it's clear that people are not flocking to the airport to jet off to destinations across Europe and the Americas, but they are getting in their cars, they are renting RVs, and they are driving. not at the same pace they took to the road from July through September of last year. All of those Northeast consumers who jump into their vehicles for day trips and weekend getaways are good for our business, helping to partly offset the decline in vehicle miles traveled since the outset of the pandemic. That being said, what happens when summer ends and vacations are over? According to industry experts, 30% of retail gasoline demand is related to commuting for work. I do not believe this will return in full for the seeable future, particularly as more people work remotely. We are seeing a slight uptick in transportation fuels volumes, customer counts, and convenience store sales as businesses throughout our region begin to reopen. However, business activity is still below pre-pandemic levels. In comparison with July 2019, in July 2020, retail gas volume was down mid-teens on a percentage basis, and convenience store sales were down less than 10%. From a margin standpoint, since the end of Q2, fuel margins in our GDSO segment have remained above the prior year. But even with a modest improvement in business, we're still extremely cautious in light of the current environment. Given ongoing questions about the extent and duration of COVID-19 and the potential imposition of more restrictive conditions on travel and previously permitted reopenings, we cannot predict the impact that the virus will have on general economic and financial conditions, and by extension, its effect on our business. In light of that, we're not providing guidance for 2020. Turning to our distribution, in light of a strong second quarter performance last week, we announced a 6.5 set increase in the quarterly cash distribution on our common units to $45.875 per unit, or $1.83 on an annualized basis. The distribution will be paid August 14 to unit holders of record as of the close of business on August 10th. Before handing the call to Daphne, I want to let you know that we've recently signed a long-term contract with a leading downstream energy company to throughput renewable diesel through our retail and waterborne west coast, sorry, through our rail and waterborne terminal on the west coast. Over the past several years, the terminal has been transloading ethanol for third parties for export. We expect to begin receiving renewable fuel at the terminal this fall. We're excited about partnering with the customer to support and advance the growing renewable fuels market. Now let me turn the call over to Daphne for the financial review. Daphne?