Good day, everyone, and welcome to Global Partners' First Quarter 2018 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 Slifka; Chief Financial Officer, Ms. Daphne Foster; Chief Operating Officer, Mr. Mark Romaine; 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, 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 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 market conditions, such as the crude oil market business cycles, demand for petroleum products and renewable fuels, utilizations 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 the purposes of Regulation FD. Now, please allow me to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thanks, Eddie. Good morning, everyone and thank you for joining us. We performed in line with our expectations for the first quarter on strong results in our retail gasoline business and more favorable market conditions in wholesale gasoline and gasoline blend stocks. Product margin in the gasoline distribution stations and stations operations segment increased 7.6 million from the same period in 2017, due in part to the contribution of the Honey Farms acquisition and solid fuel margins. Honey Farms has been a great addition to our retail portfolio and we expect it to be accretive in its first full year of operations. Throughput volumes in both the wholesale and commercial segments were strong in Q1. We are pleased with the performance of our terminal portfolio and our retail locations and continue to pursue accretive opportunities and drive additional volume through our facilities. Our strategy remains focused on complementing our organic growth with acquisitions that enable us to build on our leadership position. The deal pipeline within the retail gas station and convenience store market continues to be very active and we are always evaluating potential opportunities to expand our portfolio. Last month, the board declared a quarterly cash distribution of $0.4625 per unit, or $1.85 on an annualized basis. This distribution will be paid May 15 to unitholders of record as of the close of business in May 12. With that, let me turn it over to Daphne for her financial review. Daphne?

Thank you, Eric and good morning, everyone. As discussed in this morning's earnings release, our Q1 results reflect a one-time 52.6 million non-cash gain from the extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit, which tax credit program expired in 2011. Recall that we highlighted and excluded this item in the 2018 guidance, provided in our Q4 earnings release and conference call. The recognition of this one-time income did not impact cash flows from operations for the three months ended March 31, 2018 and will not impact cash flows from operations for full year 2018. Looking at our results combined, product margin in the first quarter increased 3.7 million to 166.1 million, due to growth in the GDSO and commercial segments, which more than offset a decrease in the wholesale segment. Operating expenses increased 6.8 million to 74 million in the quarter, primarily reflecting the addition of Honey Farms, the timing of maintenance and repairs at our terminals and an increase in credit card fees due in part to higher gasoline prices. SG&A expenses in Q1 increased 2.6 million to 39.4 million, primarily relating to headcount, incentive comps and other expenses to support our GDSO business. EBITDA for the first quarter was 105.7 million and adjusted EBITDA which excludes the net loss on sale and disposition of assets was 107.6 million. Excluding the 52.6 million one-time gains, adjusted EBITDA would have been about 55 million compared with 50 million in the same quarter last year. The $5 million decrease reflects the increase in expenses, which more than offset the increase in product margins. Interest expense was 21.4 million in Q1 2018 compared to 23.3 million in the year earlier period. The decrease was in part due to lower average balances on our credit facility, partially…

[Operator Instructions] Our first question is with Ned Baramov with Wells Fargo.

So volumes in the wholesale segment increased 11% year-over-year. And I think that marks the first quarter of year-over-year increases, since maybe 2013. Could you talk about some of the key drivers there? I think you mentioned gasoline strength, but any additional details you could provide would be great?

Yes. Sure. Good morning, Ned. This is Mark. I think we've seen growth in our wholesale volumes in terminal throughput and I think it's largely a function of a couple of things. Number one, a more intense focus on growing our wholesale sales segment of the business and then maybe equally or a bigger picture as important is we really tried to develop relationships across the board, from a holistic view across the entire portfolio of the company, including retail, terminaling, supply and marketing. And so we've taken efforts to really align ourselves with business partners who we can grow the entire business with and a lot of that includes what you'll see in the wholesale segment.

Our next question is with Selman Akyol with Stifel.

Couple of quick question. So I know you talk about the retail pipeline being active and can you just talk about how pricing is? What you're seeing out there for additional retail locations?

When you say pricing, what do you mean - you mean acquisition costs?

Correct.

Yeah. I mean, look, I think it's competitive. I think it's active. But the bottom line is I think that we have a system that is large enough and competitive enough that we can drive synergies that not all competitors in our market can. And that's an advantage to us and so I think it allows us to get in these competitive processes and not certainly win every single one of them, but there are instances where for us, the acquisition may be more meaningful and have more value than for others. Right? And that drives ultimately any multiple that we may pay down, getting us and our investors a very decent return.

And then if you think about your portfolio, is there any more you're looking to do in terms of selling or do you think you've got pretty much that behind you?

I think selling is going to - that's going to be something that we're always looking are at. I would say at the retail level, likely, it will always be going on in some form, if we're always buying companies, right. I think there are opportunities that may exist throughout all of our assets where maybe there's a better utilization for the proceeds, so we'll always look to be measuring what's the best for our portfolio and whether we put something up for sale or not, we're always going to be looking at, is there a better alternative for those assets, always.

Our next question is with Mike Gyure with Janney Montgomery Scott.

Can you guys talk a little bit more on the - your guidance for the growth capital, kind of I guess where you're planning on spending that, I guess between the segments? And then maybe if you have any kind of goals for the number of distribution locations you're talking about increasing to?

Good morning. And I think in terms of the expansion CapEx, and the guidance we give 30 to 40, we don't bifurcate that, but certainly the expectation is that majority is consistent with the past would be spent on GDSO segment, whether it's NCIs, raising rebuilds and that sort of high return accretive projects. And in terms of, I think, your next question was distributions, which we don't give guidance on distributions going forward. And today, we're running at very healthy coverages and it's about 1.4, if you take out the non-cash gain, but the board makes that decision before.

Our next question is with Ben Brownlow with Raymond James.

Given the positive performance around the terminal portfolio and your comment around the divestitures and being opportunistic there, are you seeing a kind of a renewed buyer interest in those product terminals that you intended to divest about a year ago?

Yeah. I mean I would say broadly, we haven't decided to move forward with that process, but that being said, there are other opportunities that are alternative to maybe oil or energy and so if somebody wants to buy a piece of real estate, we will be happy to sell it, right, if we can get the right value for it.

And you mentioned in the preliminary comments, the lack of nominations on the crude. Any color around the timing of when that would be realized?

So what we've been doing that is consistent for over the last year is when there is last of nominations, we have been recognizing the revenue in the quarter and it's been running a little bit south for 11 million a quarter to 10.7 million in this quarter and 10.7 million a year ago first quarter and that contract finishes up at the end of June.

Okay. So that was recognized in the first quarter?

That's correct. Yes.

Okay. I misunderstood.

Our next question is with Lin Shen with HITE.

Daphne, so far first quarter, both SG&A and OpEx are higher year over year. I think also higher, maybe versus last quarter. So should we think this is a new run rate quarterly for SG&A and OpEx?

Yeah. I think last quarter, we had the question as to whether there will be some increase perhaps in SG&A. So the way I would look at it, if you look at the quarter, the OpEx was 74 million. It's not a bad run rate, there can be fluctuations. Certainly, there is timing, in terms of maintenance projects at terminals or maintenance of the gas stations, et cetera. And then credit card fees certainly are dependent on price, but it's not a bad run rate. In terms of SG&A, 39, little bit of over 39, that may be a bit light. Again, it's timing of investments to support our businesses and appetite and promotions and it's lumpy in terms of how they get expensed for instance.

Got it. And also Eric, you mentioned that for the first quarter, there's a less favorable condition for wholesale margin for distillate. Do you see this continue for the second quarter, given that we already see the curves to backwardation?

Lin, it's Mark. I don't think - I think we don't expect - you never know what market conditions are and how they're going to develop and how they're going to change. At the moment, we don't expect the second half of the year, or Q2 and beyond to be as challenging as the first quarter. But we'll have to wait and see how that unfolds.

I also have James also on the line.

It's James speaking. Given where we are with crude oil and with gasoline pricing, have you seen any effect yet on volume? In either case, how do you think if these persistent - if these high prices continue to persist, how that might affect your estimates going forward?

Are you talking about on regional gasoline volume?

Yeah.

Yeah. We have not seen any - I would say, we have not seen any impact due to high prices. I mean, it depends how high and how long they - how high they go and how long they stay there. I think there is probably, there's probably some psychological barriers in the marketplace that might affect people's buying patterns, but at the moment, we haven't necessarily seen that filter through yet.

And if you could remind us at elevated price levels, what's the likely impact, beyond volume on the margin?

What I would say is that doesn't - that in and of itself doesn't affect the margin, right. I mean, it's - if your question is more around demand, it's - I would say it's de minimis, but both 150 to 200 parts, that's a different story, right. But sort of within the ranges that we're talking about today. It will be de minimis on either side. It also is important to keep an eye on what the general economy is doing, right, and the economy has been positive with employment going down, being low and I think that's positive for sales.

Our next question is with Theresa Chen with Barclays.

Just wanted to get your thoughts on how this whole E15 thing might shake out and if we are going to be able to sell it year round, how that might affect your different businesses.

Good morning, Theresa. It's Mark. I think that we certainly need a lot more clarity around what this change may bring. So big picture, there's certainly a lot that needs to be worked out, but big picture, we have been safely and profitably handling biofuels for many years. And so I would say, directionally, whether it's a regulatory change or even a change in market conditions, anything that would force us, require us or allow us to handle higher volumes of biofuels, I would say would generally for us be a positive. We've got some good infrastructure and some good demand to absorb those higher blends. So I would say directionally, without knowing the specifics of what this is going to look like and how it may be phased in and all the moving parts, I would say directionally, it should be a benefit for us.

Our next question is with Barrett Blaschke with MUFG Securities.

Hey guys, just to lever a little further off the kind of rising commodity price question. Are you seeing spreads widening anywhere that's generating any opportunity for your business model at this point?

Nothing notable, nothing to speak of at the moment. I think, Barrett, the one thing that I would just add to that is, and I don't know how this is going to play out, but you are seeing crude spreads widen. Are they widening to the point where it makes sense for people to resume moving by rail, we haven't seen it yet. We haven't seen that opportunity, but we still have infrastructure in place that would allow us to capitalize on those opportunities if they should present themselves.

Our next question is with Ned Baramov with Wells Fargo.

I just had a quick follow up on M&A. Could you maybe talk about how you think about the potential funding of hypothetical transactions?

Certainly, Ned, with our units trading in the 11% yield, so it's very expensive source of capital, but there are ample sources of capital out there, certainly for accretive high returns, projects or investments, several higher capital, certainly there is preferred equity out there. We will continue to practice in the small scale, but we will continue, as Eric mentioned, be looking at asset sales in terms of our retail as we continue to look at the non-strategic side and we continue to run with healthy coverage.

I would now like turn the call back over to Mr. Slifka for closing remarks.

Thanks for joining us this morning. We look forward to meeting with you at the upcoming conferences and keep you updated on our progress. Thanks guys.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.