GLOBAL PARTNERS LP The following discussion and analysis of financial condition and results of
operations of
Forward-Looking Statements
Some of the information contained in this Quarterly Report on Form 10-Q may contain forward-looking statements. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words "may," "believe," "should," "could," "expect," "anticipate," "plan," "intend," "estimate," "continue," "will likely result," or other similar expressions although not all forward-looking statements contain such identifying words. In addition, any statement made by our management concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions by us are also forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of assumptions, uncertainties and risks, many of which are beyond our control, which may cause future results to be materially different from the results stated or implied in this document. These risks and uncertainties include,
among other things:
We may not have sufficient cash from operations to enable us to pay
distributions on the Series A Preferred Units or the Series B Preferred Units ? or maintain distributions on our common units at current levels following
establishment of cash reserves and payment of fees and expenses, including
payments to our general partner.
A significant decrease in price or demand for the products we sell or a ? significant decrease in the pricing of and demand for our logistics activities
could have an adverse effect on our financial condition, results of operations
and cash available for distribution to our unitholders.
The COVID-19 pandemic and certain developments in global oil markets have had,
and may from time to time continue to have, material adverse consequences for ? general economic, financial and business conditions, and could materially and
adversely affect our business, financial condition and results of operation and
those of our customers, suppliers and other counterparties. ?We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics activities in transporting the products we sell. Implementation of regulations and directives that adversely impact the market for transporting these products by rail or otherwise could adversely affect those activities. In addition, implementation of regulations and directives related to these aforementioned services as well as a disruption in any of these transportation services could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.
?We have contractual obligations for certain transportation assets such as railcars, barges and pipelines. A decline in demand for (i) the products we sell or (ii) our logistics activities, which has resulted and could continue to result in a decrease in the utilization of our transportation assets, could negatively impact our financial condition, results of operations and cash available for distribution to our unitholders.
We may not be able to fully implement or capitalize upon planned growth
projects. Even if we consummate acquisitions or expend capital in pursuit of ? growth projects that we believe will be accretive, they may in fact result in
no increase or even a decrease in cash available for distribution to our unitholders.
?Erosion of the value of major gasoline brands could adversely affect our gasoline sales and customer traffic.
?Our gasoline sales could be significantly reduced by a reduction in demand due
to the impact of COVID-19, higher prices and new technologies and alternative
fuel sources, such as electric, hybrid, battery powered, hydrogen or other
alternative fuel-powered motor vehicles. In addition to new technologies and
alternative fuel
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sources, changing consumer preferences or driving habits could lead to new forms of fueling destinations or potentially fewer customer visits to our sites, resulting in a decrease in gasoline sales and/or sales of food, sundries and other on-site services. Any of these outcomes could negatively affect our financial condition, results of operations and cash available for distribution to our unitholders.
?Physical effects from climate change and impacts to areas prone to sea level rise or other extreme weather events could have the potential to adversely affect our assets and operations.
?Changes in government usage mandates and tax credits could adversely affect the availability and pricing of ethanol and renewable fuels, which could negatively impact our sales.
?Our petroleum and related products sales, logistics activities and results of operations have been and could continue to be adversely affected by, among other things, changes in the petroleum products market structure, product differentials and volatility (or lack thereof), implementation of regulations that adversely impact the market for transporting petroleum and related products by rail and other modes of transportation, severe weather conditions, significant changes in prices, labor shortages and interruptions in transportation services and other necessary services and equipment, such as railcars, barges, trucks, loading equipment and qualified drivers. ?Our risk management policies cannot eliminate all commodity risk, basis risk or the impact of unfavorable market conditions, each of which can adversely affect our financial condition, results of operations and cash available for distribution to our unitholders. In addition, noncompliance with our risk management policies could result in significant financial losses.
?Our results of operations are affected by the overall forward market for the products we sell, and pricing volatility may adversely impact our results.
?Our businesses could be affected by a range of issues, such as changes in demand, commodity prices, energy conservation, competition, the global economic climate, movement of products between foreign locales and withinthe United States , changes in refiner demand, weekly and monthly refinery output levels, changes in the rate of inflation or deflation, changes in local, domestic and worldwide inventory levels, changes in health, safety and environmental regulations, including, without limitation, those related to climate change, failure to obtain permits, amend existing permits for expansion and/or to address changes to our assets and underlying operations, or renew existing permits on terms favorable to us, seasonality, supply, weather and logistics disruptions and other factors and uncertainties inherent in the transportation, storage, terminalling and marketing of refined products, gasoline blendstocks, renewable fuels and crude oil. ?Increases and/or decreases in the prices of the products we sell could adversely impact the amount of availability for borrowing working capital under our credit agreement, which credit agreement has borrowing base limitations
and advance rates.
?Warmer weather conditions could adversely affect our home heating oil and residual oil sales. Our sales of home heating oil and residual oil continue to be reduced by conversions to natural gas and by utilization of propane and/or natural gas (instead of heating oil) as primary fuel sources.
?We are exposed to trade credit risk and risk associated with our trade credit support in the ordinary course of our businesses.
? The condition of credit markets may adversely affect our liquidity.
Our credit agreement and the indentures governing our senior notes contain
operating and financial covenants, and our credit agreement contains borrowing ? base requirements. A failure to comply with the operating and financial
covenants in our credit agreement, the indentures and any future financing
agreements could impact our access to bank loans and other sources of financing
as well as our ability to pursue our business activities.
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A significant increase in interest rates could adversely affect our results of ? operations and cash available for distribution to our unitholders and our
ability to service our indebtedness.
Our gasoline station and convenience store business could expose us to an ? increase in consumer litigation and result in an unfavorable outcome or
settlement of one or more lawsuits where insurance proceeds are insufficient or
otherwise unavailable.
regulate tobacco and nicotine products, and the FDA and states have enacted and
are pursuing enaction of numerous regulations restricting the sale of such
products. These governmental actions, as well as national, state and municipal
campaigns to discourage smoking, tax increases, and imposition of regulations
restricting the sale of e-cigarettes and vapor products, have and could result ? in reduced consumption levels, higher costs which we may not be able to pass on
to our customers, and reduced overall customer traffic. Also, increasing
regulations related to and restricting the sale of vapor products and
e-cigarettes may offset some of the gains we have experienced from selling
these types of products. These factors could materially affect the sale of this
product mix which in turn could have an adverse effect on our financial
condition, results of operations and cash available for distribution to our
unitholders. ?Our results can be adversely affected by unforeseen events, such as adverse weather, natural disasters, terrorism, pandemics, or other catastrophic events which could have an adverse effect on our financial condition, results of operations and cash available for distributions to our unitholders.
Our businesses could expose us to litigation and result in an unfavorable ? outcome or settlement of one or more lawsuits where insurance proceeds are
insufficient or otherwise unavailable. ?Adverse developments in the areas where we conduct our businesses could have a material adverse effect on such businesses and could reduce our ability to make distributions to our unitholders.
?A serious disruption to our information technology systems could significantly limit our ability to manage and operate our businesses efficiently.
?We are exposed to performance risk in our supply chain.
?Our businesses are subject to federal, state and municipal environmental and non-environmental regulations which could have a material adverse effect on
such businesses. ?Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which could permit them to favor their own interests to the detriment of our unitholders.
?Unitholders have limited voting rights and are not entitled to elect our general partner or its directors or remove our general partner without the consent of the holders of at least 66 2/3% of the outstanding common units (including common units held by our general partner and its affiliates), which could lower the trading price of our units.
?Our tax treatment depends on our status as a partnership for federal income tax purposes.
?Unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
Additional information about risks and uncertainties that could cause actual results to differ materially from forward-looking statements is contained in Part I, Item 1A, "Risk Factors," in our Annual Report on Form 10-K for the year endedDecember 31, 2020 and Part II, Item 1A, "Risk Factors," in this Quarterly Report on Form 10-Q. We expressly disclaim any obligation or undertaking to update these statements to reflect any change in our expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is 42
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based, other than as required by federal and state securities laws. All forward-looking statements included in this Quarterly Report on Form 10-Q and all subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Overview General We are a master limited partnership formed inMarch 2005 . We own, control or have access to one of the largest terminal networks of refined petroleum products and renewable fuels inMassachusetts ,Maine ,Connecticut ,Vermont ,New Hampshire ,Rhode Island ,New York ,New Jersey andPennsylvania (collectively, the "Northeast"). We are one of the region's largest independent owners, suppliers and operators of gasoline stations and convenience stores. As ofSeptember 30, 2021 , we had a portfolio of 1,597 owned, leased and/or supplied gasoline stations, including 295 directly operated convenience stores, primarily in the Northeast. We are also one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in theNew England states andNew York . We engage in the purchasing, selling, gathering, blending, storing and logistics of transporting petroleum and related products, including gasoline and gasoline blendstocks (such as ethanol), distillates (such as home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil and propane and in the transportation of petroleum products and renewable fuels by rail from the mid-continent region ofthe United States andCanada . Collectively, we sold approximately$3.2 billion and$8.8 billion of refined petroleum products, gasoline blendstocks, renewable fuels and crude oil for the three and nine months endedSeptember 30, 2021 , respectively. In addition, we had other revenues of approximately$0.1 billion and$0.3 billion for the three and nine months endedSeptember 30, 2021 , respectively, from convenience store sales at our directly operated stores, rental income from dealer leased and commissioned agent leased gasoline stations and from cobranding arrangements, and sundries. We base our pricing on spot prices, fixed prices or indexed prices and routinely use theNew York Mercantile Exchange ("NYMEX"),Chicago Mercantile Exchange ("CME") and Intercontinental Exchange ("ICE") or other counterparties to hedge the risk inherent in buying and selling commodities. Through the use of regulated exchanges or derivatives, we seek to maintain a position that is substantially balanced between purchased volumes and sales volumes or future delivery obligations.
Our Perspective on Global and the COVID-19 Pandemic
Overview
The COVID-19 pandemic continues to make its presence felt at home, in the office
workplace, at our retail sites and terminal locations and in the global supply
chain. We remain active in responding to the challenges posed by the COVID-19
pandemic and continue to provide essential products and services while
prioritizing the safety of our employees, customers and vendors in the
communities where we operate.
The COVID-19 pandemic resulted in an economic downturn, restricted travel to,
from and within the states in which we conduct our businesses, and in decreases
in the demand for gasoline and convenience store products. Social distancing
guidelines and directives limiting food operations at our convenience stores
contributed to a reduction in in-store traffic and sales. The demand for diesel
fuel was similarly (but not as drastically) impacted. While market conditions
have improved when compared to a year ago, the pandemic continues to impact our
operations and financial performance. We remain well positioned to pivot and
address directives from federal, state and municipal authorities designed to
mitigate the spread of the COVID-19 pandemic and promote the continuing economic
recovery. However, uncertainties surrounding the duration of the COVID-19
pandemic and demand at the pump, inside our stores and at our terminals remain.
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Moving Forward - Our Perspective
The extent to which the COVID-19 pandemic may continue to affect our operating results remains uncertain. The COVID-19 pandemic has had, and may continue to have, material adverse consequences for general economic, financial and business conditions, and could materially and adversely affect our business, financial condition and results of operations and those of our customers, suppliers and other counterparties. Our inventory management is dependent on the use of hedging instruments which are managed based on the structure of the forward pricing curve. Daily market changes may impact periodic results due to the point-in-time valuation of these positions. Volatility in the oil markets resulting from COVID-19 and geopolitical events may impact our results. Business operations today reflect changes which may remain for an indefinite period of time. In these uncertain times and volatile markets, we believe that we are operationally nimble and that our portfolio of assets may continue to provide us with opportunities. 2021 Events
Amended Credit Agreement-OnMay 5, 2021 , we and certain of our subsidiaries entered into the fifth amendment to third amended and restated credit agreement which, among other things, increased the total aggregate commitment to$1.25 billion and extended the maturity date toMay 6, 2024 . See "-Liquidity and Capital Resources-Credit Agreement." Series B Preferred Unit Offering-OnMarch 24, 2021 , we issued 3,000,000 9.50% Series B Fixed Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests in us (the "Series B Preferred Units") at a price of$25.00 per Series B Preferred Unit. Distributions on the Series B Preferred Units are payable quarterly and are cumulative from and including the date of original issue at a fixed rate of 9.50% per annum of the stated liquidation preference of$25.00 . We used the proceeds, net of underwriting discount and expenses, of$72.2 million to reduce indebtedness under our credit agreement. See Note 13 of Notes to Consolidated Financial Statements. Operating Segments We purchase refined petroleum products, gasoline blendstocks, renewable fuels and crude oil primarily from domestic and foreign refiners and ethanol producers, crude oil producers, major and independent oil companies and trading companies. We operate our businesses under three segments: (i) Wholesale, (ii) Gasoline Distribution and Station Operations ("GDSO") and (iii) Commercial. Wholesale
In our Wholesale segment, we engage in the logistics of selling, gathering, blending, storing and transporting refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We transport these products by railcars, barges, trucks and/or pipelines pursuant to spot or long-term contracts. From time to time, we aggregate crude oil by truck or pipeline in the mid-continent region ofthe United States andCanada , transport it by rail and ship it by barge to refiners. We sell home heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene and residual oil to home heating oil retailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to take delivery of the gasoline, distillates and propane at bulk terminals and inland storage facilities that we own or control or at which we have throughput or exchange arrangements. Ethanol is shipped primarily by rail and by barge. In our Wholesale segment, we obtain Renewable Identification Numbers ("RIN") in connection with our purchase of ethanol which is used for bulk trading purposes or for blending with gasoline through our terminal system. A RIN is a renewable identification number associated with government-mandated renewable fuel standards. To evidence that the required volume of renewable fuel is blended with gasoline, obligated parties must retire sufficient RINs to cover their 44
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Renewable Volume Obligation ("RVO"). Our
Gasoline Distribution and Station Operations
In our GDSO segment, gasoline distribution includes sales of branded and unbranded gasoline to gasoline station operators and sub-jobbers. Station operations include (i) convenience store sales, (ii) rental income from gasoline stations leased to dealers, from commissioned agents and from cobranding arrangements and (iii) sundries (such as car wash sales and lottery and ATM commissions).
As ofSeptember 30, 2021 , we had a portfolio of owned, leased and/or supplied gasoline stations, primarily in the Northeast, that consisted of the following: Company operated 295 Commissioned agents 291 Lessee dealers 203 Contract dealers 808 Total 1,597 At our company-operated stores, we operate the gasoline stations and convenience stores with our employees, and we set the retail price of gasoline at the station. At commissioned agent locations, we own the gasoline inventory, and we set the retail price of gasoline at the station and pay the commissioned agent a fee related to the gallons sold. We receive rental income from commissioned agent leased gasoline stations for the leasing of the convenience store premises, repair bays and other businesses that may be conducted by the commissioned agent. At dealer-leased locations, the dealer purchases gasoline from us, and the dealer sets the retail price of gasoline at the dealer's station. We also receive rental income from (i) dealer-leased gasoline stations and (ii) cobranding arrangements. We also supply gasoline to locations owned and/or leased by independent contract dealers. Additionally, we have contractual relationships with distributors in certainNew England states pursuant to which we source and supply these distributors' gasoline stations with ExxonMobil-branded gasoline. Commercial In our Commercial segment, we include sales and deliveries to end user customers in the public sector and to large commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and bunker fuel. In the case of public sector commercial and industrial end user customers, we sell products primarily either through a competitive bidding process or through contracts of various terms. We respond to publicly issued requests for product proposals and quotes. We generally arrange for the delivery of the product to the customer's designated location. Our Commercial segment also includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity. Seasonality
Due to the nature of our businesses and our reliance, in part, on consumer
travel and spending patterns, we may experience more demand for gasoline during
the late spring and summer months than during the fall and winter months. Travel
and recreational activities are typically higher in these months in the
geographic areas in which we operate, increasing the demand for gasoline.
Therefore, our volumes in gasoline are typically higher in the second and third
quarters of the calendar year. However, the COVID-19 pandemic has had a negative
impact on gasoline demand and the extent and duration of that impact remains
uncertain. As demand for some of our refined petroleum products, specifically
home heating oil and residual oil for space heating purposes, is generally
greater during the winter months, heating oil and residual oil volumes are
generally higher during the first and fourth quarters of the calendar year.
These factors may result in fluctuations in our quarterly operating results.
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Outlook
This section identifies certain risks and certain economic or industry-wide factors, in addition to those described under "-Our Perspective on Global and the COVID-19 Pandemic," that may affect our financial performance and results of operations in the future, both in the short-term and in the long-term. Our results of operations and financial condition depend, in part, upon the following:
Our businesses are influenced by the overall markets for refined petroleum
products, gasoline blendstocks, renewable fuels, crude oil and propane and
increases and/or decreases in the prices of these products may adversely impact
our financial condition, results of operations and cash available for distribution to our unitholders and the amount of borrowing available for working capital under our credit agreement. Results from our purchasing, storing, terminalling, transporting, selling and blending operations are
influenced by prices for refined petroleum products, gasoline blendstocks,
renewable fuels, crude oil and propane, price volatility and the market for
such products. Prices in the overall markets for these products may affect our
financial condition, results of operations and cash available for distribution
to our unitholders. Our margins can be significantly impacted by the forward
product pricing curve, often referred to as the futures market. We typically
hedge our exposure to petroleum product and renewable fuel price moves with
futures contracts and, to a lesser extent, swaps. In markets where future
prices are higher than current prices, referred to as contango, we may use our
storage capacity to improve our margins by storing products we have purchased
at lower prices in the current market for delivery to customers at higher
prices in the future. In markets where future prices are lower than current
prices, referred to as backwardation, inventories can depreciate in value and ? hedging costs are more expensive. For this reason, in these backward markets,
we attempt to reduce our inventories in order to minimize these effects. Our
inventory management is dependent on the use of hedging instruments which are
managed based on the structure of the forward pricing curve. Daily market
changes may impact periodic results due to the point-in-time valuation of these
positions. Volatility in oil markets may impact our results. When prices for
the products we sell rise, some of our customers may have insufficient credit
to purchase supply from us at their historical purchase volumes, and their
customers, in turn, may adopt conservation measures which reduce consumption,
thereby reducing demand for product. Furthermore, when prices increase rapidly
and dramatically, we may be unable to promptly pass our additional costs on to
our customers, resulting in lower margins which could adversely affect our
results of operations. Higher prices for the products we sell may (1) diminish
our access to trade credit support and/or cause it to become more expensive and
(2) decrease the amount of borrowings available for working capital under our
credit agreement as a result of total available commitments, borrowing base
limitations and advance rates thereunder. When prices for the products we sell
decline, our exposure to risk of loss in the event of nonperformance by our
customers of our forward contracts may be increased as they and/or their
customers may breach their contracts and purchase the products we sell at the
then lower market price from a competitor.
We commit substantial resources to pursuing acquisitions and expending capital
for growth projects, although there is no certainty that we will successfully
complete any acquisitions or growth projects or receive the economic results we
anticipate from completed acquisitions or growth projects. We are continuously
engaged in discussions with potential sellers and lessors of existing (or
suitable for development) terminalling, storage, logistics and/or marketing
assets, including gasoline stations, convenience stores and related businesses.
Our growth largely depends on our ability to make accretive acquisitions and/or
accretive development projects. We may be unable to execute such accretive ? transactions for a number of reasons, including the following: (1) we are
unable to identify attractive transaction candidates or negotiate acceptable
terms; (2) we are unable to obtain financing for such transactions on
economically acceptable terms; or (3) we are outbid by competitors. In
addition, we may consummate transactions that at the time of consummation we
believe will be accretive but that ultimately may not be accretive. If any of
these events were to occur, our future growth and ability to increase or
maintain distributions on our common units could be limited. We can give no
assurance that our transaction efforts will be successful or that any such
efforts will be completed on terms that are favorable to us.
The condition of credit markets may adversely affect our liquidity. In the
past, world financial markets experienced a severe reduction in the ? availability of credit. Possible negative impacts in the future could include a
decrease in the availability of borrowings under our credit agreement,
increased counterparty credit risk on our
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derivatives contracts and our contractual counterparties could require us to
provide collateral. In addition, we could experience a tightening of trade
credit from our suppliers.
We depend upon marine, pipeline, rail and truck transportation services for a
substantial portion of our logistics activities in transporting the products we
sell. Implementation of regulations and directives related to these
aforementioned services as well as disruption in any of these transportation
services could have an adverse effect on our financial condition, results of
operations and cash available for distribution to our unitholders. Hurricanes,
flooding and other severe weather conditions could cause a disruption in the
transportation services we depend upon and could affect the flow of service. In ? addition, accidents, labor disputes between providers and their employees and
labor renegotiations, including strikes, lockouts or a work stoppage, shortage
of railcars, trucks and barges, mechanical difficulties or bottlenecks and
disruptions in transportation logistics could also disrupt our business
operations. These events could result in service disruptions and increased
costs which could also adversely affect our financial condition, results of
operations and cash available for distribution to our unitholders. Other disruptions, such as those due to an act of terrorism or war, could also adversely affect our businesses. We have contractual obligations for certain transportation assets such as
railcars, barges and pipelines. A decline in demand for (i) the products we ? sell or (ii) our logistics activities, could result in a decrease in the
utilization of our transportation assets, which could negatively impact our
financial condition, results of operations and cash available for distribution
to our unitholders.
Our gasoline financial results in our GDSO segment can be lower in the first
and fourth quarters of the calendar year due to seasonal fluctuations in
demand. Due to the nature of our businesses and our reliance, in part, on
consumer travel and spending patterns, we may experience more demand for
gasoline during the late spring and summer months than during the fall and ? winter months. Travel and recreational activities are typically higher in these
months in the geographic areas in which we operate, increasing the demand for
gasoline. Therefore, our results of operations in gasoline can be lower in the
first and fourth quarters of the calendar year. The COVID-19 pandemic has had a
negative impact on gasoline demand and in-store traffic, and the extent and
duration of that impact remains uncertain.
Our heating oil and residual oil financial results can be lower in the second
and third quarters of the calendar year. Demand for some refined petroleum ? products, specifically home heating oil and residual oil for space heating
purposes, is generally higher during November through March than during April
through October. We obtain a significant portion of these sales during the
winter months.
Warmer weather conditions could adversely affect our results of operations and
financial condition. Weather conditions generally have an impact on the demand
for both home heating oil and residual oil. Because we supply distributors ? whose customers depend on home heating oil and residual oil for space heating
purposes during the winter, warmer-than-normal temperatures during the first
and fourth calendar quarters can decrease the total volume we sell and the
gross profit realized on those sales.
Energy efficiency, higher prices, new technology and alternative fuels could
reduce demand for our products. Higher prices and new technologies and
alternative fuel sources, such as electric, hybrid or battery powered motor
vehicles, could reduce the demand for transportation fuels and adversely impact
our sales of transportation fuels. A reduction in sales of transportation fuels
could have an adverse effect on our financial condition, results of operations
and cash available for distribution to our unitholders. In addition, increased
conservation and technological advances have adversely affected the demand for
home heating oil and residual oil. Consumption of residual oil has steadily ? declined over the last four decades. We could face additional competition from
alternative energy sources as a result of future government-mandated controls
or regulations further promoting the use of cleaner fuels. End users who are
dual-fuel users have the ability to switch between residual oil and natural
gas. Other end users may elect to convert to natural gas. During a period of
increasing residual oil prices relative to the prices of natural gas, dual-fuel
customers may switch and other end users may convert to natural gas. During
periods of increasing home heating oil prices relative to the price of natural
gas, residential users of home heating oil may also convert to natural gas. As
described above, such switching or conversion could have an
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adverse effect on our financial condition, results of operations and cash
available for distribution to our unitholders.
Changes in government usage mandates and tax credits could adversely affect the
availability and pricing of ethanol and renewable fuels, which could negatively
impact our sales. The
pursuant to the Energy Policy Act of 2005 and the Energy Independence and
Security Act of 2007. The RFS program seeks to promote the incorporation of
renewable fuels in the nation's fuel supply and, to that end, sets annual
quotas for the quantity of renewable fuels (such as ethanol) that must be
blended into transportation fuels consumed in
assigned to each gallon of renewable fuel produced in or imported into the
cannot predict the future prices of RINs. RIN prices are dependent upon a
variety of factors, including
required and the total amounts that can be generated, the availability of RINs
for purchase, the price at which RINs can be purchased, and levels of ? transportation fuels produced, all of which can vary significantly from quarter
to quarter. If sufficient RINs are unavailable for purchase or if we have to
pay a significantly higher price for RINs, or if we are otherwise unable to
meet the
adversely affected. Future demand for ethanol will be largely dependent upon
the economic incentives to blend based upon the relative value of gasoline and
ethanol, taking into consideration the
oxygenate blending requirements. A reduction or waiver of the RFS mandate or
oxygenate blending requirements could adversely affect the availability and
pricing of ethanol, which in turn could adversely affect our future gasoline
and ethanol sales. In addition, changes in blending requirements or broadening
the definition of what constitutes a renewable fuel could affect the price of
RINs which could impact the magnitude of the mark-to-market liability recorded
for the deficiency, if any, in our RIN position relative to our RVO at a point
in time. We may not be able to fully implement or capitalize upon planned growth
projects. We could have a number of organic growth projects that may require
the expenditure of significant amounts of capital in the aggregate. Many of
these projects involve numerous regulatory, environmental, commercial and legal
uncertainties beyond our control. As these projects are undertaken, required
approvals, permits and licenses may not be obtained, may be delayed or may be ? obtained with conditions that materially alter the expected return associated
with the underlying projects. Moreover, revenues associated with these organic
growth projects may not increase immediately upon the expenditures of funds
with respect to a particular project and these projects may be completed behind
schedule or in excess of budgeted cost. We may pursue and complete projects in
anticipation of market demand that dissipates or market growth that never
materializes. As a result of these uncertainties, the anticipated benefits
associated with our capital projects may not be achieved. Governmental action and campaigns to discourage smoking and use of other products may have a material adverse effect on our revenues and gross
profit.
nicotine products, and the FDA and states have enacted and are pursuing
enaction of numerous regulations restricting the sale of such products. These
governmental actions, as well as national, state and municipal campaigns to
discourage smoking, tax increases, and imposition of regulations restricting ? the sale of e-cigarettes and vapor products, have and could result in reduced
consumption levels, higher costs which we may not be able to pass on to our
customers, and reduced overall customer traffic. Also, increasing regulations
related to and restricting the sale of vapor products and e-cigarettes may
offset some of the gains we have experienced from selling these types of
products. These factors could materially affect the sale of this product mix
which in turn could have an adverse effect on our financial condition, results
of operations and cash available for distribution to our unitholders.
New, stricter environmental laws and other industry-related regulations or
environmental litigation could significantly impact our operations and/or
increase our costs, which could adversely affect our results of operations and
financial condition. Our operations are subject to federal, state and municipal ? laws and regulations regulating, among other matters, logistics activities,
product quality specifications and other environmental matters. The trend in
environmental regulation has been towards more restrictions and limitations on
activities that may affect the environment over time. For example, President
Biden signed an executive order calling for new or more stringent emissions
standards for new, modified and existing oil and gas facilities. Our
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businesses may be adversely affected by increased costs and liabilities
resulting from such stricter laws and regulations. We try to anticipate future
regulatory requirements that might be imposed and plan accordingly to remain in
compliance with changing environmental laws and regulations and to minimize the
costs of such compliance. Risks related to our environmental permits, including
the risk of noncompliance, permit interpretation, permit modification, renewal
of permits on less favorable terms, judicial or administrative challenges to
permits by citizens groups or federal, state or municipal entities or permit
revocation are inherent in the operation of our businesses, as it is with other
companies engaged in similar businesses. We may not be able to renew the permits
necessary for our operations, or we may be forced to accept terms in future
permits that limit our operations or result in additional compliance costs.
There can be no assurances as to the timing and type of such changes in existing
laws or the promulgation of new laws or the amount of any required expenditures
associated therewith. Climate change continues to attract considerable public
and scientific attention. In recent years environmental interest groups have
filed suit against companies in the energy industry related to climate change.
Should such suits succeed, we could face additional compliance costs or
litigation risks.
Further regulation of the transport by rail of fuel products may adversely
affect our financial condition and results of operations. Over the last several
years, federal and state agencies have adopted various requirements governing
the transport of fuel products, such as crude oil and ethanol. Were these
bodies to establish more stringent design or construction standards for
railcars, or impose other requirements for such railroad tank cars that are
used to transport, by example, crude oil and ethanol, those requirements, ? individually or in the aggregate, may lead to shortages of compliant railcars,
or limitations on deliveries of these products, which in either case could
adversely affect our businesses. In recent years, non-governmental groups have
intensified their efforts to use federal, state and municipal laws to restrict
the transportation of fuels products, including, without limitation, crude oil
and ethanol by railroad tank cars. Additional regulations regarding the
movement and storage of fossil fuel products by transportation modalities could
potentially expose our operations to duplicative and possibly inconsistent
regulation. Results of Operations
Evaluating Our Results of Operations
Our management uses a variety of financial and operational measurements to analyze our performance. These measurements include: (1) product margin, (2) gross profit, (3) earnings before interest, taxes, depreciation and amortization ("EBITDA") and Adjusted EBITDA, (4) distributable cash flow, (5) selling, general and administrative expenses ("SG&A"), (6) operating expenses and (7) degree days.
Product Margin
We view product margin as an important performance measure of the core
profitability of our operations. We review product margin monthly for
consistency and trend analysis. We define product margin as our product sales
minus product costs. Product sales primarily include sales of unbranded and
branded gasoline, distillates, residual oil, renewable fuels and crude oil, as
well as convenience store sales, gasoline station rental income and revenue
generated from our logistics activities when we engage in the storage,
transloading and shipment of products owned by others. Product costs include the
cost of acquiring products and all associated costs including shipping and
handling costs to bring such products to the point of sale as well as product
costs related to convenience store items and costs associated with our logistics
activities. We also look at product margin on a per unit basis (product margin
divided by volume). Product margin is a non-GAAP financial measure used by
management and external users of our consolidated financial statements to assess
our business. Product margin should not be considered an alternative to net
income, operating income, cash flow from operations, or any other measure of
financial performance presented in accordance with GAAP. In addition, our
product margin may not be comparable to product margin or a similarly titled
measure of other companies.
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Gross Profit
We define gross profit as our product margin minus terminal and gasoline station related depreciation expense allocated to cost of sales.
EBITDA and Adjusted EBITDA
EBITDA and Adjusted EBITDA are non-GAAP financial measures used as supplemental financial measures by management and may be used by external users of our consolidated financial statements, such as investors, commercial banks and research analysts, to assess:
? our compliance with certain financial covenants included in our debt
agreements;
? our financial performance without regard to financing methods, capital
structure, income taxes or historical cost basis;
? our ability to generate cash sufficient to pay interest on our indebtedness and
to make distributions to our partners;
our operating performance and return on invested capital as compared to those
of other companies in the wholesale, marketing, storing and distribution of ? refined petroleum products, gasoline blendstocks, renewable fuels, crude oil
and propane, and in the gasoline stations and convenience stores business,
without regard to financing methods and capital structure; and
? the viability of acquisitions and capital expenditure projects and the overall
rates of return of alternative investment opportunities.
Adjusted EBITDA is EBITDA further adjusted for gains or losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other
companies. Distributable Cash Flow
Distributable cash flow is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on their investment. Distributable cash flow as defined by our partnership agreement is net income plus depreciation and amortization minus maintenance capital expenditures, as well as adjustments to eliminate items approved by the audit committee of the board of directors of our general partner that are extraordinary or non-recurring in nature and that would otherwise increase distributable cash flow. Distributable cash flow as used in our partnership agreement also determines our ability to make cash distributions on our incentive distribution rights. The investment community also uses a distributable cash flow metric similar to the metric used in our partnership agreement with respect to publicly traded partnerships to indicate whether or not such partnerships have generated sufficient earnings on a current or historic level that can sustain distributions on preferred or common units or support an increase in quarterly cash distributions on common units. Our partnership agreement does not permit adjustments for certain non-cash items, such as net losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges.
Distributable cash flow should not be considered as an alternative to net income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with GAAP. In addition, our distributable cash flow may not be comparable to distributable cash flow or similarly titled measures of other companies.
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Selling, General and Administrative Expenses
Our SG&A expenses include, among other things, marketing costs, corporate overhead, employee salaries and benefits, pension and 401(k) plan expenses, discretionary bonuses, non-interest financing costs, professional fees and information technology expenses. Employee-related expenses including employee salaries, discretionary bonuses and related payroll taxes, benefits, and pension and 401(k) plan expenses are paid by our general partner which, in turn, are reimbursed for these expenses by us. Operating Expenses Operating expenses are costs associated with the operation of the terminals, transload facilities and gasoline stations and convenience stores used in our businesses. Lease payments, maintenance and repair, property taxes, utilities, credit card fees, taxes, labor and labor-related expenses comprise the most significant portion of our operating expenses. While the majority of these expenses remains relatively stable, independent of the volumes through our system, they can fluctuate depending on the activities performed during a specific period. In addition, they can be impacted by new directives issued by federal, state and local governments. Degree Days A "degree day" is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how far the average temperature departs from a human comfort level of 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a long-term (multi-year) average, or normal, to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by theNational Weather Service and officially archived by theNational Climatic Data Center . For purposes of evaluating our results of operations, we use the normal heating degree day amount as reported by theNational Weather Service at itsLogan International Airport station inBoston, Massachusetts . 51 Table of Contents Key Performance Indicators The following table provides a summary of some of the key performance indicators that may be used to assess our results of operations. These comparisons are not necessarily indicative of future results (gallons and dollars in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Net income attributable to Global Partners LP$ 33,637 $ 18,230 $ 41,479 $ 97,768 EBITDA (1)(3)$ 79,375 $ 64,965 $ 178,779 $ 235,299 Adjusted EBITDA (1)(3)$ 79,183 $ 65,859 $ 178,292 $ 237,849
Distributable cash flow (2)(3)(4)$ 49,697 $ 31,333 $
90,274$ 149,134 Wholesale Segment: (5) Volume (gallons) 813,411 916,749 2,642,437 2,860,753 Sales Gasoline and gasoline blendstocks$ 1,371,621 $ 831,332 $ 3,696,677 $ 2,356,753 Crude oil (6) 13,194 57,518 47,128 73,010 Other oils and related products (7) 451,172 270,012 1,641,250 1,181,481 Total$ 1,835,987 $ 1,158,862 $ 5,385,055 $ 3,611,244 Product margin Gasoline and gasoline blendstocks$ 22,458 $ 17,136 $ 62,379 $ 84,966 Crude oil (6) (2,814) (2,729) (10,662) 2,004 Other oils and related products (7) 22,625 14,523 54,580 59,414 Total$ 42,269 $ 28,930 $ 106,297 $ 146,384 Gasoline Distribution and Station Operations Segment: Volume (gallons) 416,778 376,317 1,146,001 1,006,300 Sales Gasoline$ 1,151,251 $ 696,184 $ 2,930,446 $ 1,896,960 Station operations (8) 134,126 122,856 357,452 325,577 Total$ 1,285,377 $ 819,040 $ 3,287,898 $ 2,222,537 Product margin Gasoline$ 112,446 $ 101,405 $ 294,001 $ 305,405 Station operations (8) 65,269 57,462 176,567 154,904 Total$ 177,715 $ 158,867 $ 470,568 $ 460,309 Commercial Segment: (4) Volume (gallons) 101,157 60,944 251,070 199,095 Sales$ 202,546 $ 83,480 $ 483,429 $ 292,271 Product margin$ 3,916 $ 1,545 $ 10,807 $ 9,398 Combined sales and product margin: Sales$ 3,323,910 $ 2,061,382 $ 9,156,382 $ 6,126,052 Product margin (9)$ 223,900 $ 189,342 $ 587,672 $ 616,091 Depreciation allocated to cost of sales (20,842) (20,101) (61,537) (61,165) Combined gross profit$ 203,058 $ 169,241 $
526,135
GDSO portfolio as ofSeptember 30, 2021 and 2020: 2021 2020 Company operated 295 278 Commissioned agents 291 272 Lessee dealers 203 209 Contract dealers 808 783 Total GDSO portfolio 1,597 1,542 52 Table of Contents Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Weather conditions: Normal heating degree days 96 96 3,750 3,750 Actual heating degree days 21 72 3,311 3,320 Variance from normal heating degree days (78) % (25) % (12) % (11) % Variance from prior period actual heating degree days (71) % 157 % - % (2) %
EBITDA and Adjusted EBITDA are non-GAAP financial measures which are (1) discussed above under "-Evaluating Our Results of Operations." The table
below presents reconciliations of EBITDA and Adjusted EBITDA to the most
directly comparable GAAP financial measures.
Distributable cash flow is a non-GAAP financial measure which is discussed
above under "-Evaluating Our Results of Operations." As defined by our
partnership agreement, distributable cash flow is not adjusted for certain (2) non-cash items, such as net losses on the sale and disposition of assets and
goodwill and long-lived asset impairment charges. The table below presents
reconciliations of distributable cash flow to the most directly comparable
GAAP financial measures.
EBITDA, Adjusted EBITDA and distributable cash flow for each of the three and
nine months ended
compensation resulting from the retirement of our former chief financial
officer in August of 2021. EBITDA, Adjusted EBITDA and distributable cash
(3) flow for the nine months ended
expense for compensation and benefits resulting from the passing of our
general counsel in May of 2021. This expense relates to contractual
commitments including the acceleration of grants previously awarded as well
as a discretionary award in recognition of service.
Distributable cash flow for the nine months ended
carryback provisions (see Note 15 for additional information).
Segment reporting results for the three and nine months ended
conform to our current presentation.
(6) Crude oil consists of our crude oil sales and revenue from our logistics
activities.
(7) Other oils and related products primarily consist of distillates and residual
oil.
(8) Station operations consist of convenience stores sales, rental income and
sundries.
Product margin is a non-GAAP financial measure which is discussed above under (9) "-Evaluating Our Results of Operations." The table above includes a
reconciliation of product margin on a combined basis to gross profit, a
directly comparable GAAP measure.
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The following table presents reconciliations of EBITDA and Adjusted EBITDA to
the most directly comparable GAAP financial measures on a historical basis for
each period presented (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Reconciliation of net income to EBITDA and
Adjusted EBITDA:
Net income $ 33,637 $ 18,192 $ 41,479 $ 97,240
Net loss attributable to noncontrolling interest - 38 - 528
Net income attributable to Global Partners LP 33,637 18,230
41,479 97,768
Depreciation and amortization 25,692 24,745 76,172 75,192
Interest expense 19,660 19,854 60,339 62,544
Income tax expense (benefit) 386 2,136 789 (205)
EBITDA (1) 79,375 64,965 178,779 235,299
Net (gain) loss on sale and disposition of
assets (192) 691 (675) 623
Long-lived asset impairment - 203 188 1,927
Adjusted EBITDA (1) $ 79,183 $ 65,859 $ 178,292 $ 237,849
Reconciliation of net cash provided by operating
activities to EBITDA and Adjusted EBITDA:
Net cash provided by operating activities $ 152,615 $ 88,286 $ 99,057 $ 250,289
Net changes in operating assets and liabilities
and certain non-cash items (93,286) (45,321) 18,594 (77,621)
Net cash from operating activities and changes
in operating assets and liabilities attributable
to noncontrolling interest - 10 - 292
Interest expense 19,660 19,854 60,339 62,544
Income tax expense (benefit) 386 2,136 789 (205)
EBITDA (1) 79,375 64,965 178,779 235,299
Net (gain) loss on sale and disposition of
assets (192) 691 (675) 623
Long-lived asset impairment - 203 188 1,927
Adjusted EBITDA (1) $ 79,183 $ 65,859 $ 178,292 $ 237,849
EBITDA and Adjusted EBITDA for each of the three and nine months ended
from the retirement of our former chief financial officer in August of 2021.
(1) EBITDA and Adjusted EBITDA for the nine months ended
include a
the passing of our general counsel in May of 2021. This expense relates to
contractual commitments including the acceleration of grants previously
awarded as well as a discretionary award in recognition of service.
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The following table presents reconciliations of distributable cash flow to the
most directly comparable GAAP financial measures on a historical basis for each
period presented (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Reconciliation of net income to distributable
cash flow:
Net income $ 33,637 $ 18,192 $ 41,479 $ 97,240
Net loss attributable to noncontrolling interest - 38 - 528
Net income attributable to Global Partners LP 33,637 18,230 41,479 97,768
Depreciation and amortization 25,692 24,745 76,172 75,192
Amortization of deferred financing fees 1,211 1,329 3,810 3,896
Amortization of routine bank refinancing fees (1,002) (1,008) (3,052) (2,933)
Maintenance capital expenditures (9,841) (11,963) (28,135) (24,789)
Distributable cash flow (1)(2)(3) 49,697 31,333 90,274 149,134
Distributions to preferred unitholders (4) (3,463) (1,682) (8,746) (5,046)
Distributable cash flow after distributions to
preferred unitholders $ 46,234 $ 29,651 Reconciliation of net cash provided by operating activities to distributable cash flow: Net cash provided by operating activities$ 152,615 $ 88,286 $ 99,057 $ 250,289 Net changes in operating assets and liabilities and certain non-cash items (93,286) (45,321) 18,594 (77,621) Net cash from operating activities and changes - 10 - 292 in operating assets and liabilities attributable to noncontrolling interest Amortization of deferred financing fees 1,211 1,329 3,810 3,896 Amortization of routine bank refinancing fees (1,002) (1,008) (3,052) (2,933) Maintenance capital expenditures (9,841) (11,963) (28,135) (24,789) Distributable cash flow (1)(2)(3) 49,697 31,333 90,274 149,134 Distributions to preferred unitholders (4) (3,463) (1,682) (8,746) (5,046) Distributable cash flow after distributions to preferred unitholders$ 46,234 $ 29,651
Distributable cash flow is a non-GAAP financial measure which is discussed
above under "-Evaluating Our Results of Operations." As defined by our (1) partnership agreement, distributable cash flow is not adjusted for certain
non-cash items, such as net losses on the sale and disposition of assets and
goodwill and long-lived asset impairment charges.
Distributable cash flow for each of the three and nine months ended
from the retirement of our former chief financial officer in August of 2021
(2) Distributable cash flow for the nine months ended
a $6.6 million expense for compensation and benefits resulting from the
passing of our general counsel in May of 2021. This expense relates to
contractual commitments including the acceleration of grants previously
awarded as well as a discretionary award in recognition of service.
Distributable cash flow for the nine months ended
carryback provisions (see Note 15 for additional information).
Distributions to preferred unitholders represent the distributions payable to
the Series A preferred unitholders and the Series B preferred unitholders (4) earned during the period. Distributions on the Series A Preferred Units and
the Series B Preferred Units are cumulative and payable quarterly in arrears
on February 15 , May 15 , August 15 and November 15 of each year.
Results of Operations
Consolidated Sales
Our total sales were $3.3 billion and $2.0 billion for the three months ended
September 30, 2021 and 2020, respectively, an increase of $1.3 billion , or 65%,
primarily due to an increase in prices. Our aggregate volume of product sold was
1.3 billion gallons and 1.4 billion gallons for the three months ended
September 30, 2021 and 2020, respectively, declining 23 million gallons
consisting of a decrease of 103 million gallons in our Wholesale segment, offset
by increases of 40 million gallons in our GDSO segment and 40 million gallons in
our Commercial segment.
Our total sales were $9.1 billion and $6.1 billion for the nine months ended
September 30, 2021 and 2020, respectively, an increase of $3.0 billion , or 49%,
primarily due to an increase in prices. Our aggregate volume of product sold was
4.0 billion gallons and 4.1 billion gallons for the nine months ended
September 30, 2021 and 2020,
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respectively, declining 26 million gallons consisting of a decrease of 218 million gallons in our Wholesale segment, offset by increases of 140 million gallons and 52 million gallons in our GDSO and Commercial segments, respectively.
Gross Profit Our gross profit was$203.1 million and$169.2 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$33.9 million , or 20%, primarily due to improved margins in our GDSO segment, both in gasoline distribution due to an increase in volume and in station operations due to an increase in activity at our convenience stores, and in our Wholesale segment primarily due to more favorable market conditions in gasoline and gasoline blendstocks and other oils and related products. Our gross profit was$526.1 million and$554.9 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$28.8 million , or 5%, primarily due to less favorable market conditions in our Wholesale segment during the first half of 2021. Lower fuel margin (cents per gallon) in our GDSO segment also contributed to the year-over-year decrease in gross profit, partially offset by an increase in fuel volume and in station operations due to an increase in activity at our convenience stores.
Results for Wholesale Segment
Gasoline and Gasoline Blendstocks. Sales from wholesale gasoline and gasoline blendstocks were$1.3 billion and$0.8 billion for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$0.5 billion , or 63%, primarily due to an increase in prices. Our gasoline and gasoline blendstocks product margin was$22.5 million and$17.1 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$5.4 million , or 31%, primarily due to more favorable market conditions in gasoline. Sales from wholesale gasoline and gasoline blendstocks were$3.7 billion and$2.4 billion for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$1.3 million , or 54%, primarily due to an increase in prices, partially offset by a decline in volume sold. Our gasoline and gasoline blendstocks product margin was$62.4 million and$85.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$22.6 million , or 27%, primarily due to less favorable market conditions largely in gasoline but also in gasoline blendstocks. During the second quarter of 2020, there was a significant recovery in the supply/demand imbalance that occurred at the end of the first quarter of 2020 caused by the COVID-19 pandemic related demand destruction and geopolitical events. The forward product pricing curve flattened during the second quarter of 2020 which positively impacted our product margins.
Crude Oil. Crude oil sales and logistics revenues were
Crude oil sales and logistics revenues were$47.1 million and$73.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$25.9 million , or 35%, primarily due to a decrease in volume sold. Our crude oil product margin was ($10.7 million ) and$2.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$12.7 million , or 632%, due to less favorable market conditions. Our crude oil product margins in the first nine months of 2020 benefitted from more favorable market conditions, including the flattening of the forward product pricing curve during the second quarter of 2020.
Other Oils and Related Products. Sales from other oils and related products (primarily distillates and residual oil) were$451.2 million and$270.0 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$181.2 million , or 67%, due to an increase in prices. Our product margin from other oils and related products was$22.6 million and$14.5 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$8.1 million , or 56%, primarily due to more favorable market conditions largely in distillates but also in residual oil. 56 Table of Contents Sales from other oils and related products were$1.6 billion and$1.2 billion for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$0.4 billion , or 34%, due to an increase in prices partially offset by a decline in volume sold. Our product margin from other oils and related products was$54.6 million and$59.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$4.8 million , or 8%, primarily due to less favorable market conditions in distillates. During the second quarter of 2020, there was a significant recovery in the supply/demand imbalance that occurred at the end of the first quarter of 2020 caused by the COVID-19 pandemic related demand destruction and geopolitical events. The forward product pricing curve flattened during the second quarter of 2020 which positively impacted our product margins.
Results for Gasoline Distribution and Station Operations Segment
Gasoline Distribution. Sales from gasoline distribution were$1.2 billion and$0.7 billion for the three months endedSeptember 30, 2021 and 2020, respectively, increasing$455.1 million , or 65%, due to increases in prices and volume sold. Our product margin from gasoline distribution was$112.4 million and$101.4 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$11.0 million , or 11%, primarily due to an increase in volume sold.
Sales from gasoline distribution were$2.9 billion and$1.9 billion for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$1.0 billion , or 53%, due to increases in prices and volume sold. Our product margin from gasoline distribution was$294.0 million and$305.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively, a decrease of$11.4 million , or 4%, primarily due to lower fuel margins (cents per gallon) partially offset by an increase in volume sold. Wholesale gasoline prices rose during most of the first nine months of 2021. Rising wholesale gasoline prices typically compress our gasoline product margin, the extent of which depends on the magnitude and duration of that rise. In contrast, for the first nine months of 2020, our product margin benefitted from higher fuel margins (cents per gallon). Wholesale gasoline prices declined, primarily in March of 2020, due to the COVID-19 pandemic and geopolitical events. Declining wholesale gasoline prices can improve our gasoline product margin, the extent of which depends on the magnitude and duration of the decline. Station Operations. Our station operations, which include (i) convenience stores sales at our directly operated stores, (ii) rental income from gasoline stations leased to dealers or from commissioned agents and from cobranding arrangements and (iii) sale of sundries, such as car wash sales and lottery and ATM commissions, collectively generated revenues of$134.1 million and$122.8 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$11.3 million , or 9%. Our product margin from station operations was$65.3 million and$57.5 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$7.8 million , or 14%. The increases in sales and product margin are primarily due to increases in activity at our convenience stores. Sales from our station operations were$357.4 million and$325.6 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$31.8 million , or 10%. Our product margin from station operations was$176.6 million and$154.9 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$21.7 million , or 14%. The increases in sales and product margin are primarily due to increases in activity at our convenience stores, including the sales of sundries.
Results for Commercial Segment
Our commercial sales were$202.5 million and$83.5 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$119.0 million or 143%, due to increases in prices and volume sold. Our commercial product margin was$3.9 million and$1.5 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$2.4 million , primarily due to an increase in volume sold and improved margins. Our commercial sales were$483.4 million and$292.3 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$191.1 million or 65%, due to increases in prices and volume sold. Our commercial product margin was$10.8 million and$9.4 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$1.4 million . 57 Table of Contents
Selling, General and Administrative Expenses
SG&A expenses were$54.7 million and$43.2 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$11.5 million , or 27%, including increases of$5.3 million in accrued discretionary incentive compensation,$2.6 million in wages and benefits and$0.5 million in various other SG&A expenses. In addition, we expensed$3.1 million for compensation resulting from the retirement of our former chief financial officer in recognition of service. SG&A expenses were$155.0 million and$143.2 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$11.8 million , or 8%, consisting of a$6.6 million expense for compensation and benefits resulting from the passing of our general counsel and a$3.1 million expense for compensation resulting from the retirement of our former chief financial officer in recognition of service and increases of$5.2 million in wages and benefits and$1.5 million in acquisition costs, offset by decreases of$2.7 million in accrued discretionary incentive compensation and$1.9 million in various other SG&A expenses. The$6.6 million expense relates to contractual commitments including the acceleration of grants previously awarded as well as a discretionary award in recognition of service. Operating Expenses Operating expenses were$92.1 million and$82.2 million for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$9.9 million , or 12%, including an increase of$11.3 million associated with our GDSO operations, in part due to increased credit card fees related to the increases in volume and price, higher salary expense and higher rent expense due in part to greater activity at our stores. Operating expenses associated with our terminal operations decreased$1.4 million , in part due to lower maintenance and repair expenses. Operating expenses were$260.8 million and$241.5 million for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$19.3 million , or 8%, including an increase of$17.0 million associated with our GDSO operations, primarily due to increased credit card fees related to the increases in volume and price, higher rent expense and higher salary expense due in part to greater activity at our stores. Operating expenses associated with our terminal operations also increased$2.3 million , primarily related to higher maintenance and repair expenses. Amortization Expense
Amortization expense related to intangible assets was$2.7 million for each of the three months endedSeptember 30, 2021 and 2020 and$8.1 million for each of the nine months endedSeptember 30, 2021 and 2020.
Net gain (loss) on sale and disposition of assets was
Long-Lived Asset Impairment
We recognized an impairment charge relating to certain developmental assets for
raze and rebuilds allocated to the GDSO segment in the amount of
We recognized an impairment charge relating to certain right of use assets
allocated to the GDSO segment in the amount of
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Interest Expense
Interest expense was $19.7 million and $19.9 million for the three months ended
September 30, 2021 and 2020, respectively, and $60.3 million and $62.5 million
for the nine months ended September 30, 2021 and 2020, respectively. The
decreases of $0.2 million , or 1%, and $2.2 million , or 4%, for the three and
nine months ended September 30, 2021 , respectively, were due in part to lower
average balances on our revolving credit facility and to lower interest rates.
The decrease for the nine month period was partially offset by a $0.4 million
write-off of deferred financing fees associated with the amendment to our credit
agreement in May 2021 .
Income Tax (Expense) Benefit
Income tax (expense) benefit was ($0.4 million ) and ($2.1 million ) for the three months endedSeptember 30, 2021 and 2020, respectively, and ($0.8 million ) and$2.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The income tax benefit for the nine months endedSeptember 30, 2020 consisted of an income tax benefit of$6.3 million (discussed below) offset by an income tax expense of ($6.1 million ). The respective income tax (expense) benefit reflects the income tax (expense) benefit from the operating results of GMG, which is a taxable entity for federal and state income tax purposes. OnMarch 27, 2020 , the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") was enacted and signed into law. The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthenthe United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act provides certain tax changes in response to the COVID-19 pandemic, including the temporary removal of certain limitations on the utilization of net operating losses, permitting the carryback of net operating losses generated in 2018, 2019 or 2020 to the five preceding taxable years, increasing the ability to deduct interest expense, deferring the employer share of social security tax payments, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. As a result, we recognized a benefit of$6.3 million related to the CARES Act net operating loss carryback provisions which is included in income tax benefit in the accompanying statement of operations for the nine months endedSeptember 30, 2020 . OnJanuary 15, 2021 , we received cash refunds totaling$15.8 million associated with the carryback of losses generated in 2018 with respect to the 2016 and 2017 tax years.
Net Loss Attributable to Noncontrolling Interest
InFebruary 2013 , we acquired a 60% membership interest inBasin Transload . In connection with the terms of an agreement between us and the minority members ofBasin Transload , onSeptember 29, 2020 , we acquired the minority members' collective 40% interest inBasin Transload (see Note 17, "Legal Proceedings" for additional information). The net loss attributable to the noncontrolling interest was$0 and immaterial for the three months endedSeptember 30, 2021 and 2020, respectively, and$0 and$0.5 million for the nine months endedSeptember 30, 2021 and 2020, respectively. The net losses in 2020 represent the 40% noncontrolling ownership of the net loss reported.
Liquidity and Capital Resources
Liquidity
Our primary liquidity needs are to fund our working capital requirements, capital expenditures and distributions and to service our indebtedness. Our primary sources of liquidity are cash generated from operations, amounts available under our working capital revolving credit facility and equity and debt offerings. Please read "-Credit Agreement" for more information on our working capital revolving credit facility.
Working capital was$244.6 million and$283.9 million atSeptember 30, 2021 andDecember 31, 2020 , respectively, a decrease of$39.3 million . Changes in current assets and current liabilities decreasing our working capital primarily include increases of$107.1 million in accounts payable and$68.5 million in the current portion of our working capital revolving credit facility, primarily due to higher prices. The decrease in working capital was offset by increases of$133.6 million in accounts receivable and$29.0 million in inventories, also primarily due to higher prices. 59 Table of Contents Cash Distributions Common Units During 2021, we paid the following cash distributions to our common unitholders and our general partner: Distribution Paid for the Cash Distribution Payment Date Total Paid Quarterly Period Ended February 12, 2021$ 19.3 million Fourth quarter 2020 May 14, 2021$ 20.5 million First quarter 2021 August 13, 2021$ 20.5 million Second quarter 2021 In addition, onOctober 25, 2021 , the board of directors of our general partner declared a quarterly cash distribution of$0.5750 per unit ($2.30 per unit on an annualized basis) on all of our outstanding common units for the period fromJuly 1, 2021 throughSeptember 30, 2021 to our common unitholders of record as of the close of business onNovember 8, 2021 . We expect to pay the total cash distribution of approximately$20.5 million onNovember 12, 2021 . Series A Preferred Units During 2021, we paid the following cash distributions to holders of the Series A Preferred Units: Distribution Paid for the Cash Distribution Payment Date Total Paid Quarterly Period Covering February 16, 2021$ 1.7 million November 15, 2020 - February 14, 2021 May 17, 2021$ 1.7 million February 15, 2021 - May 14, 2021 August 16, 2021$ 1.7 million May 15, 2021 - August 14, 2021 In addition, onOctober 18, 2021 , the board of directors of our general partner declared a quarterly cash distribution of$0.609375 per unit ($2.4375 per unit on an annualized basis) on the Series A Preferred Units for the period fromAugust 15, 2021 throughNovember 14, 2021 to our Series A preferred unitholders of record as of the opening of business onNovember 1, 2021 . We expect to pay the total cash distribution of approximately$1.7 million onNovember 15, 2021 . Series B Preferred Units
OnMay 17, 2021 , we paid the initial quarterly cash distribution of$0.3365 per unit on the Series B Preferred Units, covering the period fromMarch 24, 2021 (the issuance date of the Series B Preferred Units) throughMay 14, 2021 , totaling approximately$1.0 million . OnAugust 16, 2021 , we paid the quarterly cash distribution of$0.59375 per unit covering the period fromMay 15, 2021 throughAugust 14, 2021 , totaling approximately$1.8 million . In addition, onOctober 18, 2021 , the board of directors of our general partner declared a quarterly cash distribution of$0.59375 per unit ($2.375 per unit on an annualized basis) on the Series B Preferred Units for the period fromAugust 15, 2021 throughNovember 14, 2021 to our Series B preferred unitholders of record as of the opening of business onNovember 1, 2021 . We expect to pay the total cash distribution of approximately$1.8 million onNovember 15, 2021 . 60 Table of Contents Contractual Obligations We have contractual obligations that are required to be settled in cash. The amounts of our contractual obligations atSeptember 30, 2021 were as follows (in thousands): Payments Due by Period Remainder of 2025 and Contractual Obligations 2021 2022 2023 2024 Thereafter Total
Credit facility obligations (1)$ 27,558 $ 114,090 $ 124,914 $ 42,673 $ -$ 309,235 Senior notes obligations (2) - 52,063 52,063 52,063 942,282 1,098,471 Operating lease obligations (3) 20,552 71,124 56,092 43,675 140,467 331,910 Other long-term liabilities (4) 7,107 23,509 13,299 12,992 41,018 97,925 Financing obligations (5) 3,797 15,268 15,518
15,774 82,158 132,515 Total$ 59,014 $ 276,054 $ 261,886 $ 167,177 $ 1,205,925 $ 1,970,056
Includes principal and interest on our working capital revolving credit
facility and our revolving credit facility at
a ratable payment through the expiration date. Our credit agreement has a
contractual maturity of
prior to that date. However, we repay amounts outstanding and reborrow funds (1) based on our working capital requirements. Therefore, the current portion of
the working capital revolving credit facility included in the accompanying
consolidated balance sheets is the amount we expect to pay down during the
course of the year, and the long-term portion of the working capital
revolving credit facility is the amount we expect to be outstanding during
the entire year Please read "-Credit Agreement" for more information on our
working capital revolving credit facility.
Includes principal and interest on our senior notes. No principal payments (2) are required prior to maturity. See Note 8 of Notes to Consolidated Financial
Statements in our Annual Report on Form 10-K for the year ended
2020 for additional information on our senior notes.
(3) Includes operating lease obligations related to leases for office space and
computer equipment, land, gasoline stations, railcars and barges.
Includes amounts related to our 15-year brand fee agreement entered into in (4) 2010 with ExxonMobil and amounts related to our pipeline connection
agreements, natural gas transportation and reservation agreements, access
right agreements and our pension and deferred compensation obligations.
Includes lease rental payments in connection with (i) the acquisition ofproperty assets at 30 gasoline stations and convenience stores. These (5) transactions did not meet the criteria for sale accounting and the lease
rental payments are classified as interest expense on the respective
financing obligation and the pay-down of the related financing obligation.
See Note 8 of Notes to Consolidated Financial Statement in our Annual Report
on Form 10-K for the year ended
Capital Expenditures Our operations require investments to maintain, expand, upgrade and enhance existing operations and to meet environmental and operational regulations. We categorize our capital requirements as either maintenance capital expenditures or expansion capital expenditures. Maintenance capital expenditures represent capital expenditures to repair or replace partially or fully depreciated assets to maintain the operating capacity of, or revenues generated by, existing assets and extend their useful lives. Maintenance capital expenditures also include expenditures required to maintain equipment reliability, tank and pipeline integrity and safety and to address certain environmental regulations. We anticipate that maintenance capital expenditures will be funded with cash generated by operations. We had approximately$28.1 million and$24.8 million in maintenance capital expenditures for the nine months endedSeptember 30, 2021 and 2020, respectively, which are included in capital expenditures in the accompanying consolidated statements of cash flows, of which approximately$25.9 million and$20.0 million for the nine months endedSeptember 30, 2021 and 2020, respectively, are related to our investments in our gasoline station business. Repair and maintenance expenses associated with existing assets that are minor in nature and do not extend the useful life of existing assets are charged to operating expenses as incurred. Expansion capital expenditures include expenditures to acquire assets to grow our businesses or expand our existing facilities, such as projects that increase our operating capacity or revenues by, for example, increasing dock capacity and tankage, diversifying product availability, investing in raze and rebuilds and new-to-industry gasoline stations and convenience stores, increasing storage flexibility at various terminals and by adding terminals to our storage 61
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network. We have the ability to fund our expansion capital expenditures through cash from operations or our credit agreement or by issuing debt securities or additional equity. We had approximately$37.4 million and$14.8 million in expansion capital expenditures for the nine months endedSeptember 30, 2021 and 2020, respectively, primarily related to investments in our gasoline station business. We currently expect maintenance capital expenditures of approximately$45.0 million to$55.0 million and expansion capital expenditures, excluding acquisitions, of approximately$50.0 million to$60.0 million in 2021, relating primarily to investments in our gasoline station business. These current estimates depend, in part, on the timing of completion of projects, availability of equipment and workforce, weather, the scope and duration of the COVID-19 pandemic and unanticipated events or opportunities requiring additional maintenance or investments. We believe that we will have sufficient cash flow from operations, borrowing capacity under our credit agreement and the ability to issue additional equity and/or debt securities to meet our financial commitments, debt service obligations, contingencies and anticipated capital expenditures. However, we are subject to business and operational risks, including uncertainties related to the extent and duration of the COVID-19 pandemic and geopolitical events, each of which could adversely affect our cash flow. A material decrease in our cash flows would likely have an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt securities. Cash Flow
The following table summarizes cash flow activity (in thousands):
Nine Months Ended
September 30,
2021 2020
Net cash provided by operating activities
Operating Activities Cash flow from operating activities generally reflects our net income, balance sheet changes arising from inventory purchasing patterns, the timing of collections on our accounts receivable, the seasonality of parts of our businesses, fluctuations in product prices, working capital requirements and general market conditions. Net cash provided by operating activities was$99.1 million and$250.3 million for the nine months endedSeptember 30, 2021 and 2020, respectively, for a period-over-period decrease in cash flow from operating activities of$151.2 million . The period-over-period change was due primarily to an increase in prices during the nine months endedSeptember 30, 2021 as compared to a decrease during the prior year period.
Except for net income, the primary drivers of the changes in operating activities include the following (in thousands):
Nine Months Ended Period over
September 30, Period
2021 2020 Change
(Increase ) decrease in accounts receivable
$ (307,015) (Increase) decrease in inventories$ (27,726) $ 121,462 $ (149,188) Increase (decrease) in accounts payable$ 107,076 $ (186,592) $ 293,668 Decrease (increase) in change in derivatives$ 32,097 $ (44,704)
$ 76,801
For the nine months ended
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compared to the decrease in prices in the same period of 2020 and to changes in the volume of physical forward contracts.
For the nine months ended
Investing Activities
Net cash used in investing activities was$81.4 million for the nine months endedSeptember 30, 2021 and included$37.4 million in expansion capital expenditures,$28.1 million in maintenance capital expenditures,$18.0 million in acquisitions, primarily related to company-operated gasoline stations and convenience stores, and$1.7 million in seller note issuances which represent notes we received from buyers in connection with the sale of certain of our gasoline stations. Net cash used in investing activities was offset by$3.8 million in proceeds from the sale of property and equipment. Net cash used in investing activities was$34.8 million for the nine months endedSeptember 30, 2020 and included$24.8 million in maintenance capital expenditures,$14.8 million in expansion capital expenditures and$1.2 million in seller note issuances, offset by$6.0 million in proceeds from the sale of property and equipment. The seller note issuances represent notes we received from buyers in connection with the sale of certain of our gasoline stations.
Please read "-Capital Expenditures" for a discussion of our capital expenditures
for the nine months ended
Financing Activities
Net cash used in financing activities was$11.9 million for the nine months endedSeptember 30, 2021 and included$78.6 million in net payments on our revolving credit facility,$68.0 million in cash distributions to our limited partners (preferred and common unitholders) and our general partner,$3.8 million in the repurchase of common units pursuant to our repurchase program for future satisfaction of our LTIP obligations and$2.2 million in LTIP units withheld for tax obligations related to awards that vested in 2021, offset by$72.2 million in net proceeds from the issuance of the Series B Preferred Units and$68.5 million in net borrowing from our working capital revolving credit facility due primarily to the increase in prices. The proceeds from the issuance of the Series B units were used to pay down the revolving credit facility. Net cash used in financing activities was$222.7 million for the nine months endedSeptember 30, 2020 and included$163.8 million in net payments on our working capital revolving credit facility due to lower prices and an increase in net income,$52.4 million in cash distributions to our limited partners (preferred and common unitholders) and our general partner,$4.7 million in net payments on our revolving credit facility,$1.6 million related to the acquisition of our noncontrolling interest atBasin Transload ,$0.3 million in the repurchase of common units pursuant to our repurchase program for future satisfaction of our LTIP obligations, and$0.3 million in LTIP units withheld for tax obligations related to awards that vested in 2020. Net cash used in financing activities was offset by$0.4 million in capital contributions from our noncontrolling interest atBasin Transload . See Note 7 of Notes to Consolidated Financial Statements for supplemental cash flow information related to our working capital revolving credit facility and revolving credit facility. Credit Agreement Certain subsidiaries of ours, as borrowers, and we and certain of our subsidiaries, as guarantors, have a$1.25 billion senior secured credit facility. OnMay 5, 2021 , we and certain of our subsidiaries entered into a fifth amendment to our credit agreement which, among other things, increased the total aggregate commitment from$1.17 billion to$1.25 billion and extended the maturity date fromApril 29, 2022 toMay 6, 2024 (see "-Fifth Amendment to
the
Credit Agreement" below).
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We repay amounts outstanding and reborrow funds based on our working capital
requirements and, therefore, classify as a current liability the portion of the
working capital revolving credit facility we expect to pay down during the
course of the year. The long-term portion of the working capital revolving
credit facility is the amount we expect to be outstanding during the entire
year.
There are two facilities under the credit agreement:
a working capital revolving credit facility to be used for working capital
? purposes and letters of credit in the principal amount equal to the lesser of
our borrowing base and
? a
purposes.
Availability under the working capital revolving credit facility is subject to a borrowing base which is redetermined from time to time and based on specific advance rates on eligible current assets. Availability under the borrowing base may be affected by events beyond our control, such as changes in petroleum product prices, collection cycles, counterparty performance, advance rates and limits and general economic conditions. The average interest rates for the credit agreement were 2.3% and 2.8% for the three months endedSeptember 30, 2021 and 2020, respectively, and 2.5% and 3.0% for the nine months endedSeptember 30, 2021 and 2020, respectively. OnMarch 5, 2021 , theU.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates afterDecember 31, 2021 for the 1-week and 2-monthU.S. dollar settings and afterJune 30, 2023 for the remainingU.S. dollar settings. Our credit agreement includes provisions to determine a replacement rate for LIBOR if necessary during its term based on the secured overnight financing rate published by theFederal Reserve Bank of New York . We currently do not expect the transition from LIBOR to have a material impact on us. As ofSeptember 30, 2021 , we had total borrowings outstanding under the credit agreement of$296.3 million , including$43.4 million outstanding on the revolving credit facility. In addition, we had outstanding letters of credit of$183.0 million . Subject to borrowing base limitations, the total remaining availability for borrowings and letters of credit was$770.7 million and$778.5 million atSeptember 30, 2021 andDecember 31, 2020 , respectively. The credit agreement imposes financial covenants that require us to maintain certain minimum working capital amounts, a minimum combined interest coverage ratio, a maximum senior secured leverage ratio and a maximum total leverage ratio. We were in compliance with the foregoing covenants atSeptember 30, 2021 . The credit agreement also contains a representation whereby there can be no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect (as defined in the credit agreement). In addition, the credit agreement limits distributions by us to our unitholders to the amount of Available Cash (as defined in the partnership agreement). Please read Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Credit Agreement" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 for additional information on the credit agreement. 64 Table of Contents
Fifth Amendment to the Credit Agreement
OnMay 5, 2021 , we and certain of our subsidiaries entered into the Fifth Amendment to Third Amended and Restated Credit Agreement (the "Fifth Amendment"), which further amends the credit agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the credit agreement.
The Fifth Amendment amended certain terms, provisions and covenants of the credit agreement, including, without limitation:
increased the aggregate commitments under the facilities with the commitment
(i) under the working capital revolving credit facility increased to
million from
facility increased to $450.0 million from $400.0 million ;
(ii) extended the maturity date for the credit agreement from
May 6, 2024 ;
decreased by 0.125% the applicable rate under the working capital revolving
(iii) credit facility for borrowings of base rate loans, Eurocurrency rate loans
and cost of funds rate loans and for issuances of letters of credit; and
(iv) reduced the Eurocurrency rate floor to zero basis points and the cost of
funds rate floor to zero basis points.
All other material terms of the credit agreement remain substantially the same
as disclosed in Part II, Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Credit Agreement" in our Annual
Report on Form 10-K for the year ended December 31, 2020 .
Senior Notes
We had 7.00% senior notes due 2027 and 6.875% senior notes due 2029 outstanding
at September 30, 2021 and December 31, 2020 . Please read Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources-Senior Notes" in our Annual Report on
Form 10-K for the year ended December 31, 2020 for additional information on
these senior notes.
Financing Obligations
We had financing obligations outstanding atSeptember 30, 2021 andDecember 31, 2020 associated with historical sale-leaseback transactions that did not meet the criteria for sale accounting. Please read Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Financing Obligations" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 for additional information.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these consolidated
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. The uncertainty surrounding the short and long-term impact of
COVID-19, including the inability to project the timing of an economic
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recovery, may have an impact on our use of estimates. Actual results may differ from these estimates under different assumptions or conditions.
These estimates are based on our knowledge and understanding of current conditions and actions that we may take in the future. Changes in these estimates will occur as a result of the passage of time and the occurrence of future events. Subsequent changes in these estimates may have a significant impact on our financial condition and results of operations and are recorded in the period in which they become known. We have identified the following estimates that, in our opinion, are subjective in nature, require the exercise of judgment, and involve complex analysis: inventory, leases, revenue recognition, trustee taxes, derivative financial instruments, goodwill, evaluation of long-lived asset impairment and environmental and other liabilities. The significant accounting policies and estimates that we have adopted and followed in the preparation of our consolidated financial statements are detailed in Note 2 of Notes to Consolidated Financial Statements, "Summary of Significant Accounting Policies" included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . There have been no subsequent changes in these policies and estimates that had a significant impact on our financial condition and results of operations for the periods covered in this report.
Recent Accounting Pronouncements
A description and related impact expected from the adoption of certain new accounting pronouncements is provided in Note 18 of Notes to Consolidated Financial Statements included elsewhere in this report.
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