Good day everyone, and Welcome to the Global Partners Second Quarter 2021 Financial Results Conference Call. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Today's call is being recorded. 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 B. Hanson, and Mr. Sean Geary, Acting General Counsel and Vice President of Mergers and Acquisitions. At this time, I'd like to turn the call over to Mr. Geary 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. 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, demand for convenience store operators, 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 the 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.
Our assumptions and future performance are subject to a wide range of business risks and uncertainties. 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 it is my pleasure to turn the call over to our President and Chief Executive Officer, Eric Slifka.
Thank you, Sean. Good morning, everyone, and thank you for joining us. I begin this morning with an in memoriam. In May, we were deeply saddened by the sudden passing of our Executive Vice President and General Counsel, Edward J. Faneuil. Eddie was a treasured colleague, a loyal friend, and a trusted advisor whom I had the privilege of working with for the past 30 years. In business, he was a skilled negotiator. In his personal and professional life, he was as caring, present, and abundantly giving to family, friends, and associates as anyone I've ever known. He was a wonderful human being and colleague, and we all miss him dearly. Turning to our results, our second quarter performance was solid, particularly in light of the extraordinary market conditions in Q2 2020 and the rising commodity price environment in the second quarter this year.
In our GDSO segment, product margins were up nicely year-over-year. Higher fuel volume helped drive the increase in our gasoline distribution product margin, suggesting, at least for the moment, that the significant demand destruction caused by COVID-19 has begun to subside. Retail margins remained relatively healthy in Q2 of 2021, despite a sharp rise in wholesale gasoline prices during the quarter. The station operations component of GDSO also performed well. Product margin grew, due in part to a rise in sales as foot traffic across our C stores increased. While we were not immune from the effects of the driver shortages or supply chain issues that have affected many sectors of the economy in recent months, we saw no material impact from those issues. Our associates and partners did an outstanding job keeping our stores stocked and minimizing any disruptions.
In looking at our performance in the wholesale segment, it's important to put the results in context with the extraordinary market environment of the second quarter of 2020. Last year's second quarter was marked by a significant recovery in the supply-demand imbalance caused by COVID-19-related demand destruction and the geopolitical events in Russia and Saudi Arabia. This recovery caused historic contango and ultimately flattening of the forward pricing curve, substantially benefiting our wholesale product margins. While this year's second quarter saw far less favorable market conditions, the segment performed consistent with our expectations. On our Q1 call, I highlighted the launch of Project Carbon Freedom, a cross-industry effort organized by Global to advocate for legislation that supports the growth of renewable liquid heating fuel in the Northeast. To date, the initiative has generated nearly 5,800 advocacy letters from more than 800 advocates during this year's state legislative sessions.
I'm extremely pleased to report that since its March 8th launch, Project Carbon Freedom, or PCF, has supported the successful passage of landmark Bioheat mandates in New York, Rhode Island, and Connecticut. As the heating season approaches, PCF will continue to build out and work with its coalition of more than 100 organizations to empower industry stakeholders, including consumers, with tools and resources to forge a responsible, equitable path toward carbon-neutral home heating. Turning to our distribution, last week, the board of directors of our general partner declared a quarterly cash distribution of $57.50 per common unit, or $2.30 on an annualized basis on all outstanding units for the period from April 1st to June 30th, 2021. The distribution will be paid August 13th to unitholders of record as of August 9th.
On the M&A front, we are hopeful that our acquisition of Consumers Petroleum of Connecticut will close this quarter, subject to finalizing pending regulatory approvals. Looking ahead, we remain committed to building on the strength of our terminal and retail portfolio through strategic acquisitions and organic growth initiatives, raze & rebuilds, new to industry locations, and site enhancements that enable us to deliver value, quality, and hospitality for our guests. We recognize the growing change in consumer demands and fueling habits, and are positioning ourselves to be a location of choice, whatever the fuel type may be. We continue to prepare select retail sites for EV infrastructure, explore other green technologies, and expand our cafe, Wi-Fi, and fresh food options, in addition to rolling out touch-free purchase options.
Our fuel terminals and stations are integral to the energy needs of the regions we serve, and will remain so as we move forward. As many of you know, Daphne is retiring this month after nearly 15 years with Global, the past 8 as our accomplished and extremely hardworking CFO. One of the perks of my job is being able to work alongside with some of the best people in the industry. Daphne has been a terrific business partner, forging great relationships with our bank group, guiding several successful financial transactions, and helping to put us in a strong financial position.
She has also built a strong finance team, enabling us to promote from within our ranks our new CFO, Greg Hanson. Greg's business acumen, leadership skills, and outstanding relationships with our banking partners make him an ideal choice. I want to thank Daphne for all she has achieved and wish her a happy and healthy retirement and a lower handicap. Daphne?
Thank you, Eric. Good morning, everyone. Before we dive into the numbers, let me take a moment to express my appreciation to Eric and to everyone at Global Partners. I'm very grateful to have had the opportunity to work alongside this talented and dedicated team for the past 14+ years, and I'm proud of everything we have accomplished. It's been challenging, exciting, and rewarding, and I've developed so many wonderful relationships during my time here. I leave this seat in extremely capable hands. Greg Hanson has done an outstanding job as our Treasurer and my colleague since coming on board in 2013, and I know that he will be an outstanding CFO. I also want to acknowledge the many well wishes I have received from our analysts, investors, and banking partners since announcing my retirement in March. It has been a pleasure working with you.
As Eric noted, in looking at our second quarter results, it's important to keep in mind the difficult comparison with our record performance in Q2 of last year, which benefited from a flattening of the forward product pricing curve, providing an extraordinary benefit to our wholesale segment product margin. Net income for the second quarter of 2021 was $12.1 million, compared with $76.3 million for the same period of 2020. Adjusted EBITDA was $58.7 million, compared with $126.6 million in the year-earlier period. DCF was $26.6 million versus $95.8 million in the second quarter of 2020. Please note that EBITDA, adjusted EBITDA, and DCF for the 2021 period included $6.6 million for compensation and benefits resulting from the passing of our General Counsel in May.
TTM's distribution coverage as of June 30, 2021, was one times, or 0.9 times after factoring in distribution to our preferred unitholders. Turning to our segment details. GDSO performed well despite a sharp increase in wholesale gasoline prices during the quarter. GDSO product margin in Q2 was $162.4 million, up $16.8 million compared with the year-earlier period, as significantly higher retail fuel volumes more than offset a decline in retail fuel margins. The Gasoline Distribution contribution to product margin was up $4.5 million in the quarter to $101.3 million, despite a $0.09 per gallon decrease in fuel margins to $0.256, as retail fuel volume increased almost 42% to 395 million gallons. Volumes in the second quarter of 2021 outperformed our expectations, although they continue to be below 2019.
In addition, we were pleased with fuel margins in light of the $0.22 per gallon rise in wholesale gasoline prices during this year's second quarter. Wholesale gasoline prices were up approximately $0.05 per gallon during April, $0.07 during May, and an additional $0.10 by the end of June. Station operations also were strong, contributing $61.1 million to product margin, up to $12.3 million from the second quarter of 2020, due to an increase in activity at our convenience stores. At the end of Q2, our GDSO portfolio consisted of 1,564 sites, comprised of 283 company-operated stores, 283 commission agents, 205 lessee dealers, and 793 contract dealers. Looking at the wholesale segment, second quarter product margin was $33.5 million, down $78.5 million from the second quarter of 2020, reflecting the extreme and favorable shift in market structure during 2Q20.
For example, as we pointed out last year, the gasoline curve went from $0.20 contango at the beginning of April to $0.12 backwards at the end of June. In contrast, throughout most of this year's second quarter, the gasoline curve was more than $0.20 backwards. Similarly, the distillate curve decreased from $0.185 contango to $0.08 contango during 2Q20, as compared to this year's second quarter, when it shifted from slight contango to slight backwardation. In terms of products, wholesale gasoline and gasoline blend stocks product margin was $23.5 million in the second quarter of this year, down $34.8 million from the second quarter of 2020. Product margin in other oils and related products, which includes distillates and residual oil, was $13.3 million, down $31.2 million from the year-earlier period.
Product margin from crude oil was negative $3.3 million in the second quarter of 2021, compared with positive $9.2 million a year earlier. The negative margin in 2Q of this year reflects very little activity and $3.6 million of expense for two pipeline commitments, one of which ends in 3Q of this year, which will reduce the quarterly pipeline expense to approximately $2 million until the commitment ends at the end of 2022. While there are varying market conditions that impact every quarter, note that the $33.5 million wholesale product margin in this year's second quarter compares to a range of $31 million-$39 million in each of the second quarters of 2017-2019. Turning to the commercial segment, product margin increased approximately $0.2 million- $2.7 million. Looking at expenses, SG&A was $54 million, down $5 million from the comparable period of 2020.
During this year's second quarter, we incurred a $6.6 million expense associated with the passing of our general counsel. The expense relates to contractual commitments, including the acceleration of grants previously awarded, as well as a discretionary award in recognition of his more than 30 years of service. Excluding the $6.6 million on a pro forma basis, SG&A would have been down approximately $11.6 million, largely reflecting lower accrued incentive compensation expenses. Operating expenses increased $11.5 million- $88.2 million, in part due to an increase in credit card fees, which are a function of volume and price. Higher rent and maintenance expenses also contributed to the increase, due in part to greater activity at our stores, as well as the expansion of our footprint in the greater Philadelphia area, where we have added more than 30 sites since mid-2020.
Interest expense was $20.3 million in Q2, compared with $21.1 million in the year-earlier period, primarily due to lower average balances on our revolving credit facility, as well as lower interest rates. Now let me turn the call over to Greg to discuss CapEx and the balance sheet.
Thanks, Daphne. Excuse me. Thanks, Daphne, and good morning, everyone. I want to echo Eric's comments and thank Daphne for her service to Global. She has been an outstanding leader, and I wish her the best in her retirement. CapEx in the second quarter was approximately $21.8 million, consisting of $11.3 million of maintenance CapEx and $10.5 million of expansion CapEx, excluding acquisitions. The majority of the CapEx relates to our gas station business. For the full year of 2021, we continue to expect maintenance CapEx in the range of $45 million-$55 million. We now expect expansion CapEx in the range of $50 million-$60 million, with the majority consisting of investments in our gasoline stations and c-stores, where we continue to see opportunities for projects with strong returns. Our balance sheet remains strong.
Leverage defined in our credit agreement as funded debt to EBITDA was approximately 3.7 times at the end of the second quarter on a trailing 12-month basis. We continue to have ample excess capacity under our credit facility. As a reminder, in May, we entered into an amended credit agreement with our bank group. Among other things, the agreement extended the maturity date from April 2022 to May 2024, reduced the rate for borrowings and letters of credits, increased the working capital revolving credit facility from $770 million- $800 million, and increased the revolving credit facility from $400 million- $450 million. As of June 30th, total borrowings were $376.3 million, including $342.9 million under our $800 million working capital revolving facility and $33.4 million outstanding under our $450 million revolving credit facility.
Looking at our investor calendar, Eric and I will be participating in the Citi 2021 One-on-One Midstream Energy Infrastructure Conference, taking place virtually on August 18th and 19th. For those of you who will be attending, we look forward to meeting with you. Let me just turn the call back to Eric for closing comments.
Thank you, Greg. While we are still mindful of the potential for economic uncertainty related to COVID-19, we remain confident about the role Global Partners will continue to play in fueling the nation's energy needs. Now, Daphne, Greg, and I will be happy to take your questions. Operator?
Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before you press the star two. Once again, if you would like to ask a question, press star 1 on your telephone keypad. One moment please, while we poll for questions. Thank you. Our first question comes from the line of Selman Akyol with Stifel. Please proceed with your question.
Thank you. First off, Daphne, have fun in the next leg of the journey, and Greg, look forward to working with you. Let me just start off with, you referenced that volume sort of outperformed your expectations, and I'm wondering, can you just share any color on how it's gone since the end of the quarter?
Selman, this is Mark. I think as we have said, and you just mentioned, volumes have been outpacing our expectations. Keep in mind, we're trying to forecast the return of volumes, which obviously is difficult based on the situation. I think we've been pleased with how volume has returned and sales have returned in the stores. As we sit here in early August, we continue to see positive signs. I will say that obviously our business, as always, can be impacted by things like weather. July was a particularly tough month here in the Northeast with respect to rain and temps.
That is, I think, a factor that will affect us regardless of anything else that's going on in the world. As we sit here today, I think we're still pleased with where things are headed and obviously cautious about a resurgence in cases and whatnot. We're cautiously optimistic.
Understood. I think everyone is concerned about their reemergence. Can you just talk a little bit more about EV infrastructure and maybe plans and I guess with the U.S. now trying to aim to have 50% of car sales by 2030 EV, how you're just thinking about that or does it change your thinking at all?
I'll start this. This is Mark Romaine again, and Eric Slifka can jump in if he's got some additional thoughts. I think it was yesterday's announcement. We haven't really had time to fully digest that and sort through that. I'm not sure that it changes our outlook radically because I think it's been something that has been at the forefront of our minds for quite some time. There's still a tremendous amount of uncertainty around timing. I'm not sure yesterday's headline was a mandate, right? It was maybe something a little softer. Either way, the world is moving in that direction. It's not crystal clear to us or perhaps even anybody how things are going to unfold with respect to timing and exactly what that infrastructure and what the needs are going to be.
That being said, over the last few years, we've taken steps to either install or partner with other companies on installing EV charging infrastructure at a small number of our sites. A lot of what we're looking at moving forward, some of the projects that we have ongoing that are either raze and rebuilds or NTIs, we're starting to plan for that infrastructure. It may not be a big deal, but it's things like designating parking spaces, bringing in conduit so that we can wire transformers and chargers to any new sites that will come on board or anything that we have to open up the ground for.
It's things like that, and then obviously just trying to figure out how we play a role in whatever comes next. It's, like I said, not crystal clear at the moment, but we're trying to do the things that we can do now that may set us up to easily transition in the future.
Selman, it's Eric Slifka. I just want to add, we have the base infrastructure that we believe ultimately is going to be used to deliver whatever that energy is. We have owned real estate, we have leased real estate, locations that are in key geographies, and we feel like we're going to play a role ultimately in any of that distribution. If the conversion sort of goes to electric or hydrogen, we think our locations are best suited to deliver that fuel of the future.
I can tell you, I wish I could wave a wand and say, "Okay, I'm going to build a high-speed charging network, and I can make money on it." I don't know how to do that today, and I don't know how long that's going to take. Right? Although we can dip into the business of EVs, going full bore into it today is not clear just because I don't know where those returns come from.
Understood.
The utilization rates are low, and frankly, the costs are high, right? If you want to do a fast-charging facility, it's $400,000, $500,000 bucks to do fast charging, right? The utilization rates are still extremely low. That's not to say that that won't change, but I think when the opportunity presents itself, we'll move forward with making the investments.
Got it. Maybe, can you comment a little maybe on just what you're seeing out there on the acquisition environment? I guess thinking about the whole shift to EV doesn't diminish your appetite for acquisitions.
Yeah. Acquisitions continues to be very busy, and we're looking at acquisitions and assets that fit our footprint, that fit what we do. We'll continue to chase that, and it's about buying the right assets that we think have long-term value for the company.
Okay. Thank you very much.
Thanks, Selman.
Once again, if you would like to ask a question, press star one on your telephone keypad. Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over to Mr. Slifka for closing comments.
Thank you for joining us this morning. We look forward to keeping you updated on our progress. Enjoy the rest of the summer, everybody. Thanks.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.