Good day, everyone. And welcome to the Global Partners’ Second Quarter 2016 Financial Results Conference Call. Today’s call is being recorded. There will be an opportunity for questions at the end of the call. [Operator Instructions] With us from Global Partners are President and Chief Executive Officer, Mr. Eric Slifka; Chief Financial Officer, Ms. Daphne Foster; Chief Operating Officer, Mr. Mark Romaine; Executive Vice President Officer, Mr. Charles Rudinsky; and Executive Vice President and General Counsel, Mr. Edward Faneuil. At this time, I would like to turn the call over to Mr. Faneuil for opening remarks. Please go ahead.

Thank you. Good morning and thank you for joining us. Before we begin, let me remind everyone that this morning, we will be making forward-looking statements within the meaning of Federal Securities laws. These statements may include, but are not limited to projections, beliefs, goals and estimates concerning the future financial and operational performance of Global Partners. Estimates for Global Partners’ EBITDA guidance and future performance are based on assumptions regarding financial guidance and future performance are based on assumptions regarding market conditions, such as the competitive crude oil market, business cycles, demand for petroleum products 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. We believe these assumptions are reasonable, given currently available information and our assessment of historical trends. Because our assumptions and future performance are subject to a wide range of business risks and uncertainties, we can provide no assurance that actual performance will fall within guidance ranges. In addition, such performance is subject to risk factors, including but not limited to those described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements that may be made during today’s conference call. With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through news releases, publicly announced conference calls, or other means that will constitute public disclosure for purposes of Regulation FD. Now, please allow me to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thank you, Edward. And, good morning, everyone. We are successfully executing our plan to optimize our portfolio, divest non-strategic access, and pay down debt. With those objectives in mind, we have announced the disposition of approximately $100 million in assets. In July completed the sale-leaseback of certain New England gas stations to a premier institutional real estate investor for a total purchase price of approximately $63.5 million. The transaction involves 30 retail sites. We have master unitary lease agreement with the purchaser under which we will lease the properties for initial term of 15 years with 20 years of contractual extension options. In May, we entered in agreement to sell 31 non-strategic gas stations and C-stores in New York and Pennsylvania to Mirabito Holdings for a total cash consideration of approximately $40 million. This agreement includes term supply contracts for branded and unbranded petroleum products, underscoring our commitment to maintain a long-term interest in these assets after the sale is completed. The sale is expected to close this quarter. We are also in the process of divesting approximately 90 non-strategic retail sites in Massachusetts, Connecticut and New York through N NRC Realty & Capital Advisors. To-date, approximately one-third of these sites are under agreement at an average multiple of approximately 11 times EBITDA including in many instances term supply contracts. We are focused on maximizing returns on our existing retail portfolio and expanding our network through long-term leases and other cost efficient approaches. Selling stations is one way in which we are optimizing our portfolio. We are also adding high return locations to our retail deck where we can leverage our scale in branding and merchandising. For example, this spring we expanded our retail network into Western Massachusetts, signing a long-term agreement for 22 gas stations and C-stores with O’Connell…

Thank you, Eric, and good morning everyone. Let me start with some color on our second quarter performance. Combined product margin was down approximately 7% or $11.7 million year-over-year to $154.5 million. This decline is primarily attributable to tight crude oil differentials as mid-continent crudes did not discount sufficiently to make rail transport to the East Coast competitive with imports. SG&A expenses declined approximately $9 million or 19% in the quarter to $36.6 million, reflecting ongoing cost reduction initiatives. The decrease is largely attributable to lower professional fees due-diligence expenses related to potential acquisitions and growth projects and accrued incentive comp. SG&A for the second quarter of last year included $4.2 million in acquisition costs related to the Capitol Petroleum and Warren transactions. Operating expenses for the quarter were up $3.7 million or 5% to $75.9 million due to the Capitol acquisition in June 2015, primarily rent expense, property taxes and maintenance, as well as the addition of 22 lease sites in April 2016, which increased rent and convenience store salary expenses. We also incurred $2.2 million in costs associated with cleaning tanks and related infrastructure at our Clatskanie, Oregon terminal in order to utilize the facility for ethanol transloading. These increases were offset by $1.5 million reduction in operating costs at our Basin Transload facilities in North Dakota in response to lower volume at those locations, and $1.4 million decrease in various operating expenses associated with our terminal network. Second quarter EBITDA of $41.3 million was down $7.4 million from the same period in 2015. In the quarter, we recorded $1.9 million impairment charge related to assets used in supplying compressed natural gas and a $0.6 million loss on sites held for sale and impairment. Excluding these charges, adjusted EBITDA of $43.8 million was approximately $5.1 million less than…

Thank you. [Operator Instructions] Our first question comes from the line of Gabe Moreen from Bank of America. Please proceed with your question.

Question on the ethanol plant conversion in Clatskanie, can you just talk about how that’s going? It seems like the export market is pretty strong at the moment for ethanol. How much is embedded in your guidance from that facility, and is there a chance you might do a little better expected given market conditions?

It’s Mark. That business, as we’ve converted those tanks from crude, and tanks and the pipes from crude to ethanol, it’s a business that we expect is going to take some time to build. That being said, we have been -- we did load our first boat out for export a couple of weeks ago, we have another one slated to leave either at the end of this month or the beginning of September, and we continue to pursue opportunities to export as well as supply domestic markets. As far as how much is baked into our guidance, I don’t think we really get into that level of detail, but safe to say that we are seeing opportunities to grow that business and we’ll keep chasing it.

And then, given how, I guess, the asset sale and sale-leasebacks are proceeding and selling stuff at 11 times EBITDA, have you given consideration at all to potentially trying to buy out some of your crude oil infrastructure obligations? I don’t know if there’s any sort of NPV positive trade there; is that something that you’ve considered doing?

I think, Gabe, we would look to do anything that would benefit the unitholders. So, if there was a transaction that we thought was net beneficial for the Company, we would chase it hard.

But it sounds like no discussions at the moment, Eric?

There’s always conversations.

And then, I don’t know if I missed it from Daphne’s remarks, but the one customer that doesn’t sound like it’s meeting its NVCs and in terms of the financial impact from when that EBITDA would fall from when you recognize it, is there a chance that slips out of 2016, or is that definitely going to get recognized within 2016?

Yes. I mean, we expect certainly to you recognize any obligation for 2016 in 2016 by the end of the year.

Our next question comes from the line of Jeremy Tonet from J.P. Morgan. Please proceed with your question.

I just want to touch base real quick on the leverage. Did you guys mention what the leverage was at quarter-end? I might have missed that.

Yes, it was just under 4.5 times; it’s 4.47 times.

Okay, great. Thanks. And then, as far as the divesture programs for the gas stations hold, was that 11 times, that kind of an EBITDA average weighted across the portfolio that number?

Yes, that reflects the sites that we have agreed to sell, and that is the first group of sites, and so that is across that average debt.

Okay. How many sites is there? Sorry.

Approximately 25 sites, 25 to 30 sites.

Our next question comes from the line of Lin Shen from HITE Hedge Asset Management. Please proceed with your question.

Thank you. This is Matt Niblack for Lin. Thanks for taking the question. So, it looks like the core business performed very well this quarter. And congratulations on that execution. And the crude by rail seems to be tracking net of this delayed payment of about $8 million, seems to be tracking pretty close to where it was last quarter. So, given those two facts, it seems like you ought to be tracking closer to the high end of guidance. Is that a fair assumption? And if so, why not raise the lower end of guidance to reflect that strength in the business year-to-date?

Yes. We haven’t adjusted guidance yet, and we’ll continue to look at that as we progress through the rest of the year.

Is there any reason to think that some of the strength -- given what you are seeing in the market quarter-to-date, any reason to think that some of this strength in the business that has been displayed, particularly in the second quarter here could be reversed?

So, directionally, right? And let’s just talk about the retail piece here for the moment. Directionally, when prices fall, your margins generally widen. And when prices increase, they narrow. And, I think that -- if you just use that information and then figure it out on your own, I think you can come to a conclusion.

Fair enough. And then, on the crude by rail business, it sounds like -- I think you’ve talked about this in the past, that you don’t want to necessarily just buy out the lease if it’s not a strong return type transaction. But, to what extent are you exploring other options there such as selling a lease effectively to the GP or another third party in exchange for some payment that you would make, or equity issuance, or some other structure; is something like that on the table or being seriously considered?

We look at every option that’s available we chase, every way that you can utilize them or to make Company more efficient in some way; so, every venue that’s out there, every idea we chase down.

I’d certainly say for our perspective that we’d be interested in participating in a restructuring there. So, you’ve got one investor willing to help on that front.

Thank you.

I am going to turn it over briefly to James here for another question.

You guys talk a lot about core versus non-core in your gas station operations. If you could just talk a little bit about what makes something core and what makes something non-core when you look at it? There’s a lot of shuffling going on, so.

Yes. So, I’m not quite -- when you talk about core, I mean, look, we’ve got a retail business that comes in under GDSO. And then, we have what I would describe as sort of a heritage business, that we took public an awful long time ago. And then, we sort of have this crude business, which is sort of the third piece. And, I think when we think about core, it’s more based on sort of that heritage kind of business, which has the terminals in it, it has the supply function in it, it has a wholesale function in it, the wholesale unbranded function in it that includes distillates and gasoline. I’m not quite sure, if that’s what you’re getting at.

No, it’s more like you’re selling Binghamton and expanding in Western Mass.

And so what’s your -- be a little more [Multiple Speakers]

So, are there certain -- is something that we need to look forward in the retail that is geographically adjacent…

I think for us, when we look at that upstate New York business; that is a business that for us is not a main focus whereas if you said to me, Eric, do you want to expand in southern New Hampshire and populated parts of Massachusetts, or highway locations, same for Connecticut, same for New York, basically it’s where the population is, is where we want to emphasize our growth, on the retail. Does that makes sense to you?

Yes. So, you believe that sort of locations and more densely populated places have a better return on capital than...

Well, it depends too; it’s a little bit more complicated than that, because you’re also -- that is one attribute. There are actually many attributes that when you go and you look to where you want to be, things such as income, things such as how many existing sites exist in the marketplace. We talk about that as how much oxygen is left in the site -- in the market area that you’re looking to build or develop a site. There’s a lot of things that go into our analysis as to why we want to be in specific areas, and that I just gave you a couple of them.

Then, I guess maybe last one from me, or maybe two more. Have the favorable conditions for wholesale gasoline continued here into this quarter?

Yes, I think some of the benefit that we saw in the wholesale gasoline book was related to market conditions in end of March and into April. So, I wouldn’t expect that degree of benefit to continue. However, the gasoline market, we will continue to benefit from market conditions in the gasoline -- the wholesale gasoline segment. The market is -- can have some movement in it. So, we don’t see a real large amount of contango in the gasoline market moving forward. That being said, I think we are well-positioned to capitalize on what the market gives us with respect to gasoline.

Okay. Is there anything -- setting crude by rail aside, in the retail and in the sort of I guess the legacy wholesale, if that’s the right term, is there -- are there any trends out there that -- sort of macro trends out there that you think are particularly favorable or unfavorable to those two lines of business?

To gasoline stations business, is that…

Yes, to everything but the crude by rail. You spoke about the three lines of business…

Yes, I mean macro trends, that’s particularly favorable or unfavorable. I mean, on the gasoline, there continues to be a lot stuff -- discussion about electric vehicles but the amount that gets sold every year is not a lot in the steam of the business. CAFE standards over time are there; that’s a concern. But, it’s our belief particularly in that business and continues to be our believe that we have the best locations that those locations are going to perform well in the markets, almost regardless of sort of demand trends, because they’re going to be the assets that essentially customer demand is driven to.

Okay. And this is indeed the last one from me that the decline in the G&A due to not looking -- not spending a lot of effort, looking at acquisitions or on due diligence, is that a good run rate now or do you expect there to be increased G&A related to acquisition activity?

Yes, I think the SG&A is a reasonable run rate, certainly on the OpEx side, you saw it tick up a little bit with the 22 lease sites. And there is some seasonality in there and you’ve got credit card fees that can have impact, but not a bad run rate. Of course, you’ll have, as we sell some sites, there will be an impact there as well to bring it down a bit.

Our next question comes from the line of Barrett Blaschke from MUFJ Securities. Please proceed with your question.

Just two from me. One was, Daphne, is that correct that you said the rents are going to go into the interest expense, just as a housekeeping item?

Yes. That’s correct.

Okay. And if that’s the case, what was the tick-up in OpEx this quarter; was that all just transactional costs related to the sale?

In operating expenses? It’s actually 22 lease sites from a O’Connell Oil. So, you’ve got rents in there, you lease them and then you’ve got 22 Company-operated sites that you have employees.

Okay. So some of the rent -- I guess you’ve get rent going in there and into interest expense?

So, O’Connell Oil versus the 22 sites that we leased and that rent goes to the OpEx. The sale-leaseback, in terms of the financing obligation, that $4.4 million in rents on an annual basis will go into interest.

Yes, I just wanted to be clear on where everything was going to be. And then, quarter-over-quarter -- SG&A is down for the year obviously, but quarter-over-quarter, there was about just short of a $2 million increase. Can you give me a little color on what that was maybe; is that just seasonality a little bit or…?

If you take out the severance related charge in each quarter and then we -- there’s also some noise, when we get reimbursement from state tax funds and we had about a $1 million or so in the first quarter, if you take that out, we’re pretty much on par at about $35 million.

And then, this is more for Mark, but can you give us an idea just as -- you said there is ramp time to Clatskanie for the ethanol exports. Can you give us more of a timeframe as how long is that ramp do you think?

So, be as quick…

Is it more of an operational thing, or is it more of a contracting and sales thing I guess is my question?

It’s more of a market -- sales and marketing or supply and marketing function. So, it requires us to establish relationships with new counterparties and a lot or some of the business that will go through there will likely be for export. So, you’re talking about not only developing relationships with new counterparties but also changing people’s behavior. So, I think it’d be tough to say exactly what will constitute the ramp-up period, but we’re working hard to accelerate that and we’re having some success.

And then, one other follow-up on that, is that new to market demand or is it increasing demand or is it you are going to be pulling from other facilities where you are going to have to be stealing business from them?

It’s tough to say because some of the sales that we make will probably go into markets that maybe somewhat discretionary. But that being said, we expect to have to compete for market share for a portion of that business.

Our next question comes from the line of Gregg Brody from Bank of America Merrill Lynch. Please proceed with your question.

Just on the sell process, could you just bring us up to speed where you are? I think previously you thought you’d have final bids in by June, but I imagine there is -- things never work out quite as planned. So, I’m just curious, what’s the timing, and is there any change in the size of what you think you want to sell?

I don’t think -- no, there is no change. First round of bid was due end of June. And so, you go through that process and you review them and you land on some and you say those are good and you keep going with the others. So, that there is -- it is tracking as we expected, and I think certainly in the first third or so, at 11 times EBITDA we were reasonably pleased with that.

Those prices look very good. Just when you talk about your leverage targets going forward, do you think about them with capital leases or do you think about that?

Do you mean in terms of the whole transition in 2019? We don’t have -- right now, it’s operating leases, and the financing obligations are not included.

No, you just put $63 million of capital leases in, so…

No, those actually are -- those are operating leases in the financing obligation itself because you’re really grossing up the balance sheet, both leaving the assets on as well to booking at $63 million financing obligation, you are grossing up the balance sheet. That financing obligation is not included in our calculation of leverage because they’ve got operating leases.

And that’s with respect to the covenants for your bank group, which I fully understand.

Right.

With respect to how you think about the Company, do you think about that as debt or do you exclude that?

I don’t think about the financing obligation as debt.

That is all the time we have for questions. I would like to hand the call back over to Mr. Slifka for closing comments.

Thank you all for joining us today. We look forward to speaking with you next quarter. Thank you.

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