Global Partners Forges Ahead With Raze & Rebuild Program

WALTHAM, Mass. -- Global Partners LP continues to focus on high-return projects in its gasoline distribution and station operations segment, particularly its "raze and rebuild" program.

This year, Global Partners renovated and reopened three locations on the Connecticut Turnpike. To date, such work has been completed on 11 of Global Partners' 23 locations along this heavily trafficked corridor. "The remaining 12 locations should be substantially completed over the next year or so," CEO Eric Slifka said during today's 2013 fiscal third-quarter earnings call.

Beyond the Connecticut Turnpike corridor, Global Partners continues to execute its strategy of developing other retail locations. Year to date, the master limited partnership (MLP) opened two new-to-industry sites and one raze-and-rebuild facility. Global Partners expects to complete one additional raze-and-rebuild project and one major renovation by the end of this year.

"Our growth model concentrates on high-return projects and we are pleased with their overall performance, which has resulted in increases in volume and c-store revenues," Slifka stated, adding that the company's gasoline distribution and station operations segment "continues to contribute annuity like income."

Net product margin in the segment was up 24 percent year over year to $64.7 million in the third quarter, driven in part by a lower retail gas price environment, said Slifka. "Our performance also benefited from activities within our new-to-industry and raze-and-rebuild program," the CEO noted.

Chief Financial Officer Daphne Foster provided more details about the retail segment's returns.

The segment's fuel net product margin increased by almost $10 million year over year to $43.4 million, due to the decline in gasoline prices. The aforementioned $64.7-million net product margin for Q3 includes $21.3 million generated from station operations, primarily rental income and margin generated in Global Partners' approximately 120 corporate-owned and -operated convenience stores.

"On a trailing four-quarter basis, this segment generated $238 million in net product margin, which translates to a quarterly average of approximately $59 million," said Foster.

Companywide, Global Partners' net income was $3.4 million for its third quarter ended Sept. 30, compared to net income of $6.9 million in the year-ago period. Sales in its gasoline distribution and station operations segment decreased approximately 4 percent to $911.7 million vs. $944.3 million for the year-ago period.

"We benefited from a strong performance in our gasoline distribution and station operations, and favorable marketing conditions in wholesale distillates," Slifka explained. "As expected, our performance was moderated by backwardation in wholesale gasoline blendstocks and supply dislocations in crude oil that compressed margins and reduced volumes."

Waltham, Mass.-based Global Partners LP's approximately 900 convenience stores and gas stations are located in Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont. It sells fuel under the Mobil, Exxon, Shell, Sunoco, CITGO, Gulf and Global brands.