Good day, everyone, and welcome to the Global Partners First Quarter 2021 Financial Results Conference Call. Today's call is being recorded. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. 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 Treasurer and Incoming CFO, Mr. Gregory Hansen and Executive Vice President of the General Counsel, Mr. Edward Fanuel.
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 This morning, we will be making forward looking statements within the meaning of federal securities laws. These statements may include, but are not limited projections, beliefs, goals, estimates concerning the future financial and operational performance of Logan Partners. Forward looking statements are based on assumptions regarding market conditions such as the crude oil market business cycles, demand for petroleum products, including Demand for convenience store offerings, 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 duration of the COVID-nineteen pandemic, uncertainty around the timing of an economic recovery in the United States, So it will impact the demand for the products we sell and the services we provide. Uncertainty around the impact of the COVID-nineteen pandemic To our counterparties and our customers and their corresponding ability to perform their obligations and or utilize the products we sell and or the services We provide uncertainty around the impact and duration of federal, state and municipal regulations and directives related to the COVID-nineteen pandemic and assumptions that could cause actual results to differ materially from the Partnership's historical experience and present expectations We believe these assumptions are reasonable given currently available information. Our assumptions and future performance are subject No obligation to revise or publicly release the results of any revision to any forward looking statements 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 Now it is my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifkin.
Thank you, Edward, and good morning, everyone. Before we review the quarter, let me take a moment to welcome our Treasurer, Greg As we announced in March, Greg assumes the role of CFO in September upon Daphne's retirement from Wolfe. I'll have more to say on our Q2 call in August about Daphne's outstanding contributions to Global over the past 14 years and the great work Greg has done in the lead up to his promotion. Welcome, Greg. With more than 1 third of the US now fully vaccinated against COVID-nineteen And a growing number of businesses reopening, the economic landscape is improving and industry drive fuel demand is increasing as more people take to the roads.
In the Q1 of 2021, our fuel volumes in GDSO, those still up in the same period in 2020, Showed size of rebounding from COVID lows, while retail fuel margins remained relatively strong despite a significant 1st quarter spike in wholesale gasoline prices, which were up more than $0.70 through mid March. In our wholesale segment, product margin in the Q1 of 2021 was $25,000,000 better than the same period a year earlier. The improvement was driven by more favorable market conditions, primarily in gasoline and other oils and related products, as well as colder temperatures. Looking at recent highlights, in the Q1, we launched Project Carbon Freedom, a pioneering coalition That expands the use of biofuels in New England, New York and throughout the Northeast. This initiative brings together heating oil distributors, farmers, domestic biodiesel producers and policymakers from the Northeast and Midwest Through outreach, education and advocacy, the coalition aims to bring awareness to several important realities that aren't addressed by climate Calling to electrify home heating across our region.
Project Carbon Freedom supports optimizing existing In order to meet state and federal decarbonization targets with domestically produced renewable biofuels, Which are already being used to heat homes across the Northeast and beyond. Since the March launch, we have seen tremendous support Across a number of sectors for this common sense approach. In just 2 months, we mobilized over 700 advocates from 21 more than 500 state and federal legislators and signed up nearly 90 coalition members. Complementing the rollout of Project Carbon Freedom, we continue to increase our ability to move renewable fuels and help customers reduce their carbon Towards that end, we recently secured a U. S.
Department of Agriculture grant that will allow us to expand biofuel capabilities at 5 of our terminals and distribute higher blends of low carbon biodiesel to customers in the Northeast. Turning to GDSO to our GDSO segment. We are continuing to expand our retail footprint in the Greater Philadelphia market With the addition of more than 30 sites since mid-twenty 20, which strengthens the integration with our terminal network in the Pennsylvania and New Jersey markets. We have an expansion CapEx range of $40,000,000 to $50,000,000 in 2021 and plan to deploy that capital across a broad range of projects, Including raze and rebuilds, new to industry sites and remodels. From a strategic standpoint, our focused real estate investments are vital to the future of motoring products, whether they be liquid fuels, electric charging stations or other forms of energy.
Appealing to a growing consumer niche and an investment in sustainability, we continue to broaden our homegrown all time fresh market footprint. Our market provides fresh locally sourced chef driven meals and provisions and cafe inspired spaces to Sit and enjoy freshly brewed coffee. With 7 currently in operation, we plan to open 7 more in 2020 or early 2022. On the M and A front, the pipeline is very active. We continue to evaluate opportunities to expand our geographic footprint, complement our Service offerings and drive profitability and growth.
As I've noted on previous calls, our capital investments and strategic acquisition initiatives are designed with the goal of mid teen returns or higher. We spoke with you last quarter about our acquisition of retail fuel and convenience store Turning to our distribution. Last month, the Board of Directors of our general partner declared a quarterly cash distribution of $57.50 per common unit For 2.30 on an annualized basis on all outstanding units for the period from January 1 to March 31, 2021. This marks the 4th consecutive quarter in which the Board has raised the distribution, which is an important component of our overall capital allocation strategy Energy Information Administration projects that U. S.
Gasoline consumption will improve slightly from 2020, but still remain below 2019. While the EIA expects ongoing effects from the pandemic to have a significant effect on petroleum markets this summer, Those effects are expected to lessen through 2021 as an increasing percentage of the U. S. Population For our retail fuel business, which operates across 10 states, improving demand trends depend very much on the pace at which each Region schools, youth sports and other extracurricular activities fully reopen, the return of rush hour commuters and all the other events that people That put people in their cars. Heading into summer, we're encouraged by the data that appears to show many states turning a corner in terms of the pandemic.
We'll have to see how the rest of the year plays out. Now with that, let me turn the call over to Daphne for her financial review. Daphne?
Thank you, Eric, and good morning, everyone. Let me begin this morning by discussing our recently completed Series B Preferred Unit offering, which further positions us to capitalize on acquisitions and organic expansion opportunities. A total of 3,000,000 units were which were used to reduce indebtedness under our credit agreement. Distributions on the Series B units will be payable quarterly at 6% per annum. As previously announced, the prorated initial distribution of $3,365 will be payable on May 17, holders of record as of the opening of business on May 3.
Turning to our results. Adjusted EBITDA for the Q1 of 2021 was $40,400,000 compared with $45,400,000 for the same period of 2020. The $5,000,000 delta reflects a decrease in combined product margins due largely to lower volume And retail fuel margins in our GDSO segment as well as an increase in SG and A expenses. The net loss attributable to the partnership was $4,300,000 in the Q1 of 2021 compared with net income of $3,300,000 for the same period of 2020. PCF was $14,000,000 in the Q1 of 2021 compared with at $22,000,000 in the prior year period.
Both net income and DCF in the Q1 of 2020 included a tax In the Q1 of 2021, we received $15,800,000 in cash refunds associated with that carryback. TTM distribution coverage as of March 31, 2021 was 2.04 times or 1.94 times after factoring in distribution to our preferred unitholders. Turning to our segment details. GDSO profit margin in Q1 was primarily reflecting lower retail fuel margins as well as the impact of COVID-nineteen for a full quarter on retail fuel volume. The gasoline to distribution contribution to product margin was down $27,000,000 in the quarter to 80,200,000 reflecting a $0.65 per gallon decrease in fuel margin to $0.24 per gallon, coupled with a 4.9% decrease in fuel volume.
Volumes in the Q1 of 2021 outperformed our expectations, and we were pleased with the fuel margin performance in light of the sharp increase in wholesale gasoline prices. Wholesale gasoline prices were up more than $0.20 in January, dollars 0.30 in February and an additional $0.20 by mid March before prices In contrast, the fuel margin in last year's Q1 benefited from a rapid decline in wholesale gasoline prices, which fell $0.97 per gallon between the beginning and the end of March. Station operations contributed $50,200,000 to product margins, up $1,500,000 from the Q1 of 2020, primarily reflecting increases in rent and sundry. At the end of Q1, our GDSO portfolio consisted of 1566 sites comprised of 283 company operated stores, 281 commissioned agents, 2 0 6 lucky dealers and 796 contract dealers. Looking at the Wholesale segment, 1st quarter 2021 product margin increased $25,000,000 to $30,500,000 driven by more favorable market conditions and temperatures that were 16% colder year over year.
Keep in mind that wholesale margin in the Q1 of 2020 was one of the lowest in many years In our terminal network positions us to take advantage of the contango market. Gasoline and Gasoline Glenstock product margin contributed 16 by end of quarter point in time valuation of inventory position. Product margins from other oils and related products, which includes distillate Residual oil increased $18,200,000 to $18,600,000 Product margin from crude oil was negative $4,500,000 in the Q1 of 2021 2020. Turning to the Commercial segment, Product margins decreased $1,100,000 to $4,200,000 in the Q1 of 2021, reflecting a decline in our bunkering business due to the pandemic. Looking at expenses, operating expenses decreased $2,000,000 to $80,500,000 in the Q1.
The decrease reflects lower expenses at our GDSO sites, including lower salary expense, in part due to reduced store hours, lower maintenance and repair expense and lower commissions and credit card fees related to the reduction in volume, all of which was partly the result of the pandemic. SG and A expenses increased $5,400,000 to $46,300,000 in the 1st quarter, reflecting increases in accrued incentive compensation, salaries and benefits and acquisition related $21,600,000 in the year earlier period, primarily due to lower cash balances on our credit facilities as well as lower interest rates. CapEx in the Q1 was approximately $16,900,000 consisting of $7,000,000 of maintenance CapEx and $9,900,000 of expansion CapEx excluding acquisitions, most of which relates to our gas station business. For full year 2021, we continue to expect maintenance CapEx in the range of $45,000,000 to 55,000,000 And expansion CapEx in the range of $40,000,000 to $50,000,000 with the majority consisting of investments in Our balance sheet remains strong with leverage defined in our credit agreement with funded EBITDA of approximately 2.8x at the end of the first quarter. We continue to have ample excess capacity under our credit facility.
As of March 31, total borrowings were $385,800,000 including $352,400,000 under our 7 $1,000,000 working capital revolving credit facility and $33,400,000 outstanding under our $400,000,000 revolving credit facility. Adding to our financial flexibility, this month we entered into an amended credit agreement with our bank group. Among other things, the agreement extends the maturity date from April 2022 to May 2024, Reduces the applicable rate for borrowings and letters of credit, increases the working capital revolving credit facility from $778,000,000 to 800,000,000 And increases of revolving credit facility from $400,000,000 to $450,000,000 Looking at our investor calendar, we will be participating virtually in several upcoming events, including the EIC Investor Conference, The BofA Energy Credit Conference and the Stifel Cross Sector Insight Conference. For those of you who will be attending, we look forward to meeting with you. Now let me turn the call back to Eric for closing comments.
Thanks, Daphne. Looking ahead, we are following through on a number of strategic and positioning ourselves to take advantage of our infrastructure, low carbon fuel and other opportunities. We remain focused on our strategy to grow through organic initiatives and strategic M and A. We have a robust pipeline of retail investments and other projects Plans for 2021 and believe that we are well positioned for the future. Now Daphne and I are happy to take your questions.
Operator?
Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.
Thank you. Good morning. Good morning.
Can you maybe talk
a little bit more about what you're seeing in the M and A market?
Yes. Hi. It's Eric. It's just very busy. It's just very busy.
We continue to sort of look at companies and try to do deals that will fit us and deals where we can bring value And be disciplined. Look, I don't know if it's people are Driven by taxes or other things, but it just continues to be busy and there's a lot out there.
Are you seeing sellers' expectations more reasonable, more in line?
I think for us, we're not going to win every deal and we do the deals that fit us, that fit into our network and our system. And so I don't whether somebody thinks it's a lot or a little, I think it's we should try to stay And make sure that we can get the returns for our investors and for the company.
Got it. I think previously you had installed 1 or 2 charging stations at some of your stations and I'm just kind of curious how that was going.
Yes. I mean, so on 1, we partnered with Electrify America and that's a high speed Charging station. I don't know the exact usage rate, but very low single Very low single digits, it might be 1%, 2%.
Got it. And then last one, you guys have been consistently Growing the distribution, is there any comments you can make going forward?
Hi, Selman. No, I don't think there's any comment we can give you in terms of forward guidance on distributions. I think to the comments that we made And how we've always thought about it. We're looking at what the investment opportunities are for us and how to provide the best return
Our
Our next question comes from the line of Theresa Chen with Barclays. Please proceed with your question.
Good morning. Thank you for taking my questions. I wanted to touch on the biofuels front and just want to ask about your early learnings On your renewable diesel handling activities at Class Cunai and is that any of those lessons are translatable to what you're trying to do in
Yes. I mean, in terms of I'd say renewable diesel on the West Coast, it's For us, the handling of it has been, I'd say pretty seamless. I think the production side of it is maybe a little bit different than that and just How it gets transported, but in terms of the facilities and our ability to take it and our ability to control it and manage it, it's been seamless.
Got it. And just understanding a little bit on the puts and takes Economic process relates to this. So, is the product primarily being distributed within Oregon? Or do you also handle the transportation of it California.
So as you yes, in that facility, we're it's just a throughput. It's a long term throughput agreement. And the business partner takes it out by barge or ship and they deliver to wherever they want to take it. Understand that. It's likely it's going to California.
But I can't tell you that with 100% certainty.
Got it. And as you know, incremental production capacity is likely coming online and need Throughput agreements for Destination Terminals, when you renegotiate or when you contract These agreements to begin with, what do you think about the economics of the fee relative to Like a traditional petroleum product would typically command?
Yes. I mean, I don't think they're all that much different. I mean, it's a that particular company has Rail in or rail out, it has tankage and it has a large dock, Right. And those are really the premises that help it to be that help the assets be positioned Well in the marketplace. And so, the real question Isn't on the rates per se, but it's you've got to have those certain attributes to be competitive for that business.
Got it. And as Washington State recently passed its own clean fuel standard legislation To the state assembly, is that incremental opportunity for that terminal to handle additional products since There will be more end demand in the Pacific Northwest?
I mean, specifically, I believe that There will continue to be additional pressure on every state To lower their carbon footprint. Historically, California sort of led the way I'm not sure every state is going to follow it exactly, but I do believe as we move forward, Whether it's a renewable diesel or some other liquid fuel, that there's going to be opportunities On the inside, and I think it's just generally, just very generally, going to become a broader fuel that gets Used not just on the West Coast, but really throughout the country, right? So at the end of the day, we have this base infrastructure. And how do we take that infrastructure and move those renewable fuels For ourselves or for partners, because I do believe it's going to over time take a piece of demand away from what I would say is historical fuels. So it's going to be I think it's an So all this change and this is just very general, all this change may create some anxiety, but it creates a lot of opportunity because We have to change with the opportunity.
They're new and they're different. You've just got to be aware of them and then try to market into them. Right. So I look at it as a glass is half full.
Got it. Thank you. Our next question comes from the line of Ned Baramov with Wells Fargo. Please proceed with your question.
Hi, good morning. First off, Daphne, congrats on your retirement and Greg, good luck in your new role. My first question is on fuel margins in the GDSO segment. Could you maybe talk about how fuel margins have been trending in the month of April May? And what your expectation is for the rest of the year given rising crude oil Likely higher fuel demand as this driving season shapes up to be more normal than what we saw last year.
Not sure I'll give you the specifics on April in terms of margin, but I would say that overall we've continued to see this over the last couple of years and Certainly saw this this past quarter in terms of in an off market margins continue to be better. And I was actually looking back at Q1 of 2019. Q1 of 2019, prices were going up for the $0.50 the last 2 months of that year. And then going back to 2019, I guess 2020 We continue to be pleased with the margins relative in an off market. And so our bias would be that, that should continue and has been somewhat of an offset Shortfall in volumes, but the expectation is that volumes will continue to pick up as modem traffic
Got it. Thanks for this. And then could you talk about the closing of the Connecticut acquisition? It seems that it's delayed by a quarter or so. So just wondering what's driving the longer process here?
And also to the Stan, you can comment on this. Can you provide any financial metrics related to this transaction?
Yes. We just in terms of the timing, it's just slipped a little bit. We continue to work with government agencies to come to a So but we really feel like it just slipped a little bit there. And what was the second question again?
If you could provide any financial metrics related to this transaction. I totally understand if you can really comment on this Given how close you are to the completion of the deal?
Yes. What I would say is, in our comments earlier in the call, We said our deals are roughly mid teen kind of deals. I'd say that's consistent.
Okay, got it. Thank you. And then last question, I presume the preferred issuance in March How do you think about the potential funding of future acquisitions?
Good morning, Ned. Well, we have $33,000,000 Having said that, we're always going to be looking at our leverage and making sure that our balance sheet is in good order. But we upsized back up to $450,000,000 on the revolver and
There are no further questions at this time. I would like to turn the floor back over to Mr. Slitka for closing comments.
Thank you for joining us this morning. We look forward to keeping you updated on our progress. Everybody enjoy the weekend. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.