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. Today's call is being recorded. With us from Global Partners Our President and Chief Executive Officer, Mr. Eric Slifka Chief Financial Officer, Ms.
Daphne Foster Chief Operating Officer, Mr. Mark Romain Treasurer and Incoming CFO, Mr. Gregory Hansen 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.
Gere, 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 bond 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 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-nineteen 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-nineteen pandemic to our counterparties and our customers and their corresponding ability to perform their 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 or projections.
We believe these assumptions are reasonable 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 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 Faneuil. Eddie was a treasured colleague, a loyal friend and a trusted advisor 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 2nd quarter performance was solid, particularly in light of the extraordinary market conditions in Q2 2020 And the rising commodity price environment in the Q2 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 Significant demand destruction caused by COVID-nineteen has begun to subside. Retail margins remain 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. And looking at our performance in the wholesale segment, It's important to put the results in contact with the extraordinary market environment of the Q2 of 2020. Last year's Q2 was marked by a significant recovery in the supply demand imbalance caused by COVID-nineteen 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 2nd quarter saw far less favorable market The segment performed consistent with our expectations.
On our Q1 call, I highlighted the launch of Project Carbon Freedom across industry effort organized by Global to advocate for legislation that The growth of renewable liquid heating fuel in the Northeast. To date, the initiative has generated nearly 5,800 advocacy letters For more than 800 advocates during this year's state legislative sessions. And I'm extremely pleased to report That since its March 8 launch, Project Carbon Freedom or PCF has supported the successful 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 1 to June 30, 2021, the distribution will be paid August 13th to unitholders of record as of August 9. On the M and A front, we are hopeful that our acquisition of Consumers We remain committed to building on the strength of our terminal and retail portfolio through strategic acquisitions and organic growth initiatives, raze and 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 our to be a local or 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 And we serve that 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 date is 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.
Steph? Thank you, Eric, and 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. I'm very grateful We've had the opportunity to work alongside this talented and dedicated team for the past 14 plus 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 I leave this seat in extremely capable hands.
Greg 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 pricing curve providing an extraordinary benefit to our wholesale segment product margin. Net income for the Q2 of 2021 was $12,100,000 compared with $76,300,000 for the same period of 2020. Adjusted EBITDA was $58,700,000 compared with $126,600,000 in the year earlier period, While DCF was $26,600,000 versus $95,800,000 in the Q2 of 2020.
Please note that EBITDA, adjusted EBITDA and DCF for the 2021 period included $6,600,000 for compensation and benefits resulting from the passing of our General Counsel in May. TTM's distribution coverage as of June 30, 2021 was 1x or 0.9x 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 162,400,000, up 16,800,000 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 $4,500,000 in the quarter to $101,300,000 despite a $0.09 gallon decrease in fuel margins to $0.256 as retail fuel volume increased almost 42% to 395,000,000 gallons. Volumes in the Q2 of 2021 outperformed our expectations, although they continue to be below 2019. In addition, we were pleased with fuel margins in light dollars per gallon during April, dollars 0.07 during May and an additional $0.10 by the end of June. Station operations also was strong, contributing $61,100,000 to product margin, up $12,300,000 from the Q2 of 2020 due to an increase in activity at our convenience stores.
At the
end of Q2, our GDSO portfolio consisted of 1564 sites comprised of 283 company operated Looking at the wholesale segment, 2nd quarter product margin was $33,500,000 down $78,500,000 from the Q2 of For example, as we pointed out last year, the gasoline curve went from $0.20 contango at the beginning of April to $0.12 backward at the end of June. In contrast, throughout most of this year's Q2, the gasoline curve was more than $0.20 backwards. Similarly, the distillate curve decreased from $0.185 contango to $0.08 contango during 2Q 'twenty as compared to this 2nd quarter when it shifted from slight contango to slight backwardation. In terms of products, wholesale gasoline and gasoline blend Stock's product margin was $23,500,000 in the Q2 of this year, down $34,800,000 from the Q2 of 2020. Product margin in other oils and related products, which includes distillate and residual oil, was $13,300,000 down $31,200,000 from the year earlier period.
Product for 2 pipeline commitments, one of which ends in 3Q of this year, which will reduce the quarterly pipeline expense to approximately $2,000,000 until the commitment ends at the end of 2022. While there are varying market conditions that impact Note that the $33,500,000 wholesale product margin in this year's 2nd quarter compares to a range of 31,000,000 to $39,000,000 in each of the 2nd quarters of 2017 to 2019. Turning to the Commercial segment, SG and A was $54,000,000 down $5,000,000 from the comparable period of 2020. During this year's Q2, we incurred A $6,600,000 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 the discretionary award in recognition of its more than 30 years of service.
Excluding the $6,600,000 on a pro form a basis, SG and A would have been down approximately 11,600,000 largely reflecting lower accrued incentive compensation expenses. Operating expenses $11,500,000 to $88,200,000 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 well as the expansion of our footprint in the Greater Philadelphia area, where we have added more than 30 sites since mid-twenty 20. Interest expense was $20,300,000 in Q2 compared with $21,100,000 in the year 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. Good morning 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 Q2 was approximately $21,800,000 consisting of $11,300,000 of maintenance CapEx and $10,500,000 of expansion CapEx Excluding acquisitions, the majority of the CapEx relates to our gas station business. For the full year 2021, we continue to expect maintenance CapEx in the range of 45 $55,000,000 We now expect expansion CapEx in the range of $50,000,000 to $60,000,000 with the majority consisting of investments in our gasoline stations and CCOs 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 Approximately 3.7x at the end of the second quarter on a trailing 12 month basis. We continue to have ample excess capacity under our credit As a reminder, in May, we entered into an amended credit agreement with our bank group. Among other things, the agreement extended the maturity $770,000,000 to $800,000,000 and increased the revolving credit facility from $400,000,000 to 450,000,000 As of June 30, total borrowings were $376,300,000 including $342,900,000 Under our $800,000,000 working capital revolving facility and $33,400,000 outstanding under our $450,000,000 revolving credit facility. Looking at our investor calendar, Eric and I will be participating in the Citi 2021 1 on 1 Midstream Energy Infrastructure Conference Taking place virtually on August 18, 19.
For those of you who will be attending, we look forward to meeting with you. Now let me just turn the call back to Eric
Thank you, Greg. While we are still mindful of the potential for economic uncertainty related to COVID-nineteen, We remain confident about the role Global Partners will play 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. 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, we look forward to working with you.
So 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?
Yes. Selman, this is Mark. I think as you see as we have said and you just mentioned, volumes had been, have been outpacing our expectations. But keep in mind, We're trying to forecast the return of volumes, which obviously is difficult based on the situation. But I think we've been pleased with how volume has returned and sales have returned in the stores.
And We are, as we sit here in early August, we continue to see Positive signs. I will say that obviously our business as always is can be impacted by things like weather. And July was a particularly tough month here in the Northeast with respect to rain and temps. So That is I think a factor that will affect us regardless of anything else that's going on in But 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.
So we're cautiously optimistic.
Understood. I think everyone is concerned about sort of their pre emergence. Then can you just talk a little bit more about sort of EV infrastructure and maybe plans and I guess with The U. S. Now trying to aim to have 50% of car sales by 2,030 EV, how you're just thinking about that or does it change your thinking at all?
I'll start. This is Mark again and
I'll Eric can jump in if he's got some additional thoughts. But 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 we has been at the forefront of our minds for quite some time. And the timing will be there's still a tremendous amount of uncertainty around timing.
I'm not Yesterday's headline was a mandate, right? It was maybe something a little softer. But either way, the world is moving in that direction. And so 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, We have 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.
And 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 and it may not 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. So 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.
Salvin, it's Eric Slifka. I just want to add. We have the base infrastructure, Right, that we believe ultimately is going to be used to deliver whatever that energy is. So we have owned real estate, we have leased real estate Locations that are in key geographies and we feel like we're going 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. And so 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. So the utilization rates are low and frankly, the costs are high, right? If you want to do Fast charging facility, it's $400,000 $500,000 To do fast charging, right, and the utilization rates are still extremely low.
And that's not to say that that will change, but I think when the opportunity presents itself, We'll move forward with making the investments. Got it.
And then maybe can you comment a little maybe on just what you're seeing out there on the acquisition environment? And then, I guess, Thinking about the whole ship to EV doesn't diminish your appetite for acquisitions?
Yes. So acquisitions continues to be very, very busy and we're looking at Acquisitions and assets that fit our footprint, that fit what we do, we'll continue 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,
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.