GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Contract Balances

A receivable, which is included in accounts receivable, net in the accompanying consolidated balance sheets, is recognized in the period the Partnership provides services when its right to consideration is unconditional. In contrast, a contract asset will be recognized when the Partnership has fulfilled a contract obligation but must perform other obligations before being entitled to payment.

The nature of the receivables related to revenue from contracts with customers and other revenue, as well as contract assets, are the same, given they are related to the same customers and have the same risk profile and securitization.Payment terms on invoiced amounts are typically 2 to 30 days.

A contract liability is recognized when the Partnership has an obligation to transfer goods or services to a customer for which the Partnership has received consideration (or the amount is due) from the customer. The Partnership had no significant contract liabilities at both September 30, ~~2019~~2020 and December 31, ~~2018. Payment terms on invoiced amounts are typically 2 to 30 days.~~2019.

Note 4.3. Net Income ~~(Loss)~~ Per Common Limited Partner Unit

Under the Partnership’s partnership agreement, for any quarterly period, the incentive distribution rights (“IDRs”) participate in net income only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in the Partnership’s undistributed net income or losses. Accordingly, the Partnership’s undistributed net income or losses is assumed to be allocated to the common unitholders and to the General Partner’s general partner interest.

Common units outstanding as reported in the accompanying consolidated financial statements at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 excludes ~~129,671~~29,974 and ~~244,128~~128,170 common units, respectively, held on behalf of the Partnership pursuant to its repurchase program (see Note ~~14)~~13). These units are not deemed outstanding for purposes of calculating net income per common limited partner unit (basic and diluted). For ~~the three and nine months ended September 30, 2019,~~all periods presented below, the Series A Preferred Units (as defined in Note ~~15)~~14) are not potentially dilutive securities based on the nature of the conversion feature.

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(Unaudited)

The following table provides a reconciliation of net income ~~(loss)~~ and the assumed allocation of net income (loss) to the common limited partners (after deducting amounts allocated to Series A preferred unitholders) for purposes of computing net income ~~(loss)~~ per common limited partner unit for the periods presented (in thousands, except per unit data):


	Three Months Ended September 30, 2019								Three Months Ended September 30, 2018
			Common		General						Common		General
			Limited		Partner						Limited		Partner

																	Three Months Ended September 30, 2020								Three Months Ended September 30, 2019
																			Common		General						Common		General
																			Limited		Partner						Limited		Partner
Numerator:	Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs
Net income (loss) attributable to Global Partners LP	$	15,080	$	14,685	$	395	$	—	$	(14,080)	$	(14,053)	$	(27)	$	—
Net income attributable to Global Partners LP																	$	18,230	$	17,906	$	324	$	—	$	15,080	$	14,685	$	395	$	—
Declared distribution	$	18,091	$	17,678	$	119	$	294	$	16,325	$	16,149	$	109	$	67	$	17,306	$	16,998	$	106	$	202	$	18,091	$	17,678	$	119	$	294
Assumed allocation of undistributed net loss		(3,011)		(2,993)		(18)		—		(30,405)		(30,202)		(203)		—
Assumed allocation of net income (loss)	$	15,080	$	14,685	$	101	$	294	$	(14,080)	$	(14,053)	$	(94)	$	67
Assumed allocation of undistributed net income (loss)																		924		908		16		—		(3,011)		(2,993)		(18)		—
Assumed allocation of net income																	$	18,230	$	17,906	$	122	$	202	$	15,080	$	14,685	$	101	$	294
Less net income attributable to Series A preferred limited partners				1,682								1,009								1,682								1,682
Net income (loss) attributable to common limited partners			$	13,003							$	(15,062)
Net income attributable to common limited partners																			$	16,224							$	13,003
Denominator:
Basic weighted average common units outstanding				33,865								34,114								33,924								33,865
Dilutive effect of phantom units				401								—								285								401
Diluted weighted average common units outstanding				34,266								34,114								34,209								34,266
Basic net income (loss) per common limited partner unit			$	0.38							$	(0.44)
Diluted net income (loss) per common limited partner unit			$	0.38							$	(0.44)
Basic net income per common limited partner unit																			$	0.48							$	0.38
Diluted net income per common limited partner unit																			$	0.47							$	0.38

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(Unaudited)

Nine Months Ended September 30, 2019

Nine Months Ended September 30, 2018


Common

General



Common

General


Limited

Partner

Limited

Partner

Numerator:

Total

Partners

Interest

IDRs

Total

Partners

Interest

IDRs

Net income attributable to Global Partners LP

$
36,695

$
35,630

$
1,065

$
—

$
51,375

$
50,896

$
479

$
—

Declared distribution

$
53,697

$
52,524

$
354

$
819

$
48,479

$
48,021

$
324

$
134

Assumed allocation of undistributed net (loss) income

(17,002)

(16,894)

(108)

—

2,896

2,875

21

—

Assumed allocation of net income

$
36,695

$
35,630

$
246

$
819

$
51,375

$
50,896

$
345

$
134

Less net income attributable to Series A preferred limited partners

5,046

1,009

Net income attributable to common limited partners

$
30,584

$
49,887

Denominator:

Basic weighted average common units outstanding

33,791

33,680

Dilutive effect of phantom units

464

214

Diluted weighted average common units outstanding

34,255

33,894

Basic net income per common limited partner unit

$
0.91

$
1.48

Diluted net income per common limited partner unit

$
0.89

$
1.47


	Nine Months Ended September 30, 2020								Nine Months Ended September 30, 2019
			Common		General						Common		General
			Limited		Partner						Limited		Partner
Numerator:	Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs
Net income attributable to Global Partners LP	$	97,768	$	96,911	$	857	$	—	$	36,695	$	35,630	$	1,065	$	—
Declared distribution	$	46,483	$	45,978	$	303	$	202	$	53,697	$	52,524	$	354	$	819
Assumed allocation of undistributed net income (loss)		51,285		50,933		352		—		(17,002)		(16,894)		(108)		—
Assumed allocation of net income	$	97,768	$	96,911	$	655	$	202	$	36,695	$	35,630	$	246	$	819
Less net income attributable to Series A preferred limited partners				5,046								5,046
Net income attributable to common limited partners			$	91,865							$	30,584
Denominator:
Basic weighted average common units outstanding				33,887								33,791
Dilutive effect of phantom units				354								464
Diluted weighted average common units outstanding				34,241								34,255
Basic net income per common limited partner unit			$	2.71							$	0.91
Diluted net income per common limited partner unit			$	2.68							$	0.89

The board of directors of the General Partner declared the following quarterly cash distributions on its common units:

Per Unit Cash


Distribution Declared for the

Cash Distribution Declaration Date

Distribution Declared

Quarterly Period Ended

April 29, 2019

$
0.5100

March 31, 2019

July 26, 2019

$
0.5150

June 30, 2019

October 25, 2019

$
0.5200

September 30, 2019


	Per Unit Cash		Distribution Declared for the
Cash Distribution Declaration Date	Distribution Declared		Quarterly Period Ended
April 27, 2020	$	0.39375	March 31, 2020
July 31, 2020	$	0.45875	June 30, 2020
October 26, 2020	$	0.50000	September 30, 2020

The board of directors of the General Partner declared the following quarterly cash distributions on its SeriesA Preferred Units:

Per Unit Cash


Distribution Declared for the

Cash Distribution Declaration Date

Distribution Declared

Quarterly Period Covering

April 19, 2019

$
0.609375

February 15, 2019 - May 14, 2019

July 22, 2019

$
0.609375

May 15, 2019 - August 14, 2019

October 22, 2019

$
0.609375

August 15, 2019 - November 14, 2019


	Per Unit Cash		Distribution Declared for the
Cash Distribution Declaration Date	Distribution Declared		Quarterly Period Covering
April 16, 2020	$	0.609375	February 15, 2020 - May 14, 2020
July 20, 2020	$	0.609375	May 15, 2020 - August 14, 2020
October 19, 2020	$	0.609375	August 15, 2020 - November 14, 2020

See Note ~~15,~~14, “Partners’ Equity and Cash Distributions” for further information.

Note 4. Inventories

~~Note 5. Inventories~~

The Partnership hedges substantially all of its petroleum and ethanol inventory using a variety of instruments, primarily exchange-traded futures contracts. These futures contracts are entered into when inventory is purchased and are either designated as fair value hedges against the inventory on a specific barrel basis for inventories qualifying for fair value hedge accounting or not designated and maintained as economic hedges against certain inventory of the Partnership on a specific barrel basis. Changes in fair value of these futures contracts, as well as the offsetting change in

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

fair value on the hedged inventory, are recognized in earnings as an increase or decrease in cost of sales. All hedged inventory designated in a fair value hedge relationship is valued using the lower of cost, as determined by specific identification, or net realizable value, as determined at the product level. All petroleum and ethanol inventory not designated in a fair value hedging relationship is carried at the lower of historical cost, on a first-in, first-out basis, or net realizable value. Renewable Identification Numbers (“RINs”) inventory is carried at the lower of historical cost, on a first-in, first-out basis, or net realizable value. Convenience store inventory is carried at the lower of historical cost, based on a weighted average cost method, or net realizable value.

Inventories consisted of the following (in thousands):


	September 30,		December 31,
	2019		2018

					September 30,		December 31,
					2020		2019
Distillates: home heating oil, diesel and kerosene	$	175,921	$	173,403	$	172,965	$	222,202
Gasoline		109,692		93,534		75,165		120,958
Gasoline blendstocks		44,680		52,195		25,574		39,702
Crude oil		13,749		21,325		9,864		16,018
Residual oil		24,720		21,054		21,012		26,521
Propane and other		1,530		1,447		392		1,356
Renewable identification numbers (RINs)		1,521		1,034		1,876		1,329
Convenience store inventory		21,882		22,450		21,858		22,396
Total	$	393,695	$	386,442	$	328,706	$	450,482

The decrease in inventories, with the exception of convenience store inventory, is primarily due to lower prices at September 30, 2020 compared to December 31, 2019.

In addition to its own inventory, the Partnership has exchange agreements for petroleum products and ethanol with unrelated third-party suppliers, whereby it may draw inventory from these other suppliers and suppliers may draw inventory from the Partnership. Positive exchange balances are accounted for as accounts receivable and amounted to ~~$3.0~~$2.6 million and ~~$3.8~~$9.2 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Negative exchange balances are accounted for as accounts payable and amounted to ~~$19.7~~$9.2 million and ~~$14.9~~$17.6 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Exchange transactions are valued using current carrying costs.

Note 5. Goodwill

~~Note 6. Goodwill~~

The following table presents changes in goodwill, all of which has been allocated to the GDSO segment (in thousands):


Balance at December 31, 2019	$	324,474
Dispositions (1)		(585)
Balance at September 30, 2020	$	323,889

Balance at December 31, 2018

$
327,406

Dispositions (1)

(2,662)

Balance at September 30, 2019

$
324,744

(1)

~~(1)~~

Dispositions represent derecognition of goodwill associated with the sale and disposition of certain assets. See Note 8.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7.6. Property and Equipment

Property and equipment consisted of the following (in thousands):


	September 30,		December 31,
	2019		2018

					September 30,		December 31,
					2020		2019
Buildings and improvements	$	1,172,918	$	1,126,645	$	1,221,025	$	1,196,502
Land		452,794		456,334		450,459		452,104
Fixtures and equipment		45,578		44,479		34,851		46,848
Idle plant assets		30,500		30,500		30,500		30,500
Construction in process		26,928		37,636		32,559		27,951
Capitalized internal use software		32,893		32,127		30,275		33,502
Total property and equipment		1,761,611		1,727,721		1,799,669		1,787,407
Less accumulated depreciation		660,003		595,089		729,418		682,544
Total	$	1,101,608	$	1,132,632	$	1,070,251	$	1,104,863

Property and equipment includes assets held for sale of ~~$5.6~~$2.9 million and ~~$8.1~~$4.6 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

At September 30, ~~2019,~~2020, the Partnership had a ~~$46.2~~$42.3 million remaining net book value of long-lived assets at its West Coast facility, including $30.5 million related to the Partnership’s ethanol plant acquired in 2013. ~~In 2016, the Partnership shifted the facility from crude oil to ethanol transloading and began transloading ethanol.~~ The Partnership would need to take certain measures to prepare the facility for ethanol production in order to place the plant into service and commence depreciation. Therefore, the ~~$30.5~~$30.5 million related to the ethanol plant was included in property and equipment and classified as idle plant assets at September 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

If the Partnership is unable to generate cash flows to support the recoverability of the plant and facility assets, this may become an indicator of potential impairment of the West Coast facility. The Partnership believes these assets are recoverable but continues to monitor the market for ethanol, the continued business development of this facility for ~~either~~ ethanol or ~~crude oil~~other product transloading, and the related impact this may have on the facility’s operating cash flows and whether this would constitute an impairment indicator.

Evaluation of Long-Lived Asset Impairment

The Partnership recognized an impairment ~~charges~~charge relating to certain right of use assets allocated to the GDSO segment in the amount of $0.2 million for each of the three and nine months ended September 30, 2020 and to the Wholesale segment in the amount of $0 and $1.7 million for the three and nine months ended September 30, 2020, respectively, which is included in long-lived asset impairment in the accompanying statements of operations.

The Partnership recognized an impairment charge relating to long-lived assets used at certain gasoline stations and convenience stores in the ~~amounts~~amount of $0.6 million for each of the three and nine months ended September 30, 2019, ~~and $0.4 million for each of the three and nine months ended September 30, 2018. These assets are allocated to the GDSO segment, and the respective impairment~~which is included in ~~goodwill and~~ long-lived asset impairment in the accompanying statements of ~~operations for~~operations. These assets are allocated to the ~~three and nine months ended September 30, 2019 and 2018.~~ GDSO segment.

2017

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8.7. Sales and Disposition of Assets

The following table provides the Partnership’s (gain) loss on sale and dispositions of assets for the periods presented (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

									Three Months Ended				Nine Months Ended
									September 30,				September 30,
									2020		2019		2020		2019
Periodic divestiture of gasoline stations	$	—	$	40		(142)		(183)	$	—	$	—		(278)		(142)
Strategic asset divestiture program - Real estate firm coordinated sale		275		(168)		(1,455)		987		68		275		(32)		(1,455)
Loss on assets held for sale		9		1,056		1,274		4,590		558		9		964		1,274
Other		39		12		71		446		65		39		(31)		71
Total	$	323	$	940	$	(252)	$	5,840	$	691	$	323	$	623	$	(252)

Periodic Divestiture of Gasoline Stations

As part of the routine course of operations in the GDSO segment, the Partnership may periodically divest certain gasoline stations. The gain or loss on the sale, representing cash proceeds less net book value of assets and recognized liabilities at disposition, net of settlement and dispositions costs, is recorded in net loss (gain) on sale and disposition of assets in the accompanying consolidated statements of operations and amounted to ~~$0 and an immaterial loss~~$0 for each of the three months ended September 30, 2020 and 2019, and ~~2018, respectively,~~($0.3 million) and ~~gains of $0.1 million and $0.2 million~~($0.1 million) for the nine months ended September 30, ~~2019~~2020, and ~~2018,~~2019, respectively.

Strategic Asset Divestiture Program

The Partnership identified certain non-strategic GDSO sites that are part of its Strategic Asset Divestiture Program (the “Divestiture Program”). The gain or loss on the sales of these sites, representing cash proceeds less net book value of assets and recognized liabilities at disposition, net of settlement and dispositions costs, is recorded in net loss (gain) on sale and disposition of assets in the accompanying consolidated statements of operations.

Real Estate Firm Coordinated Sales—The Partnership has retained a real estate firm to coordinate the continuing sale of non-strategic GDSO sites. The Partnership sold 20 sites and 133 sites during the three and nine months ended September 30, ~~2019,~~2020, respectively. The Partnership recognized an immaterial gain on the sales of these sites for the nine months ended September 30, 2020, including the derecognition of $0.6 million of GDSO goodwill.

The Partnership recognized a loss of $0.3 million and a gain of ~~$1.5 million~~($1.5 million) on the sales of ~~these~~ sites for the three and nine months ended September 30, 2019, respectively, including the derecognition of $0.4 million and $2.7 million of GDSO goodwill for these respective periods.

The Partnership recognized a gain of $0.2 million and a loss of $1.0 million on the sales of sites for the three and nine months ended September 30, 2018, respectively, including the derecognition of GDSO goodwill in the amount of $1.7 million and $3.1 million for the three and nine months ended September 30, 2018, respectively.

Loss on Assets Held for Sale

In conjunction with the periodic divestiture of gasoline stations and the sale of sites within the Divestiture Program, the Partnership may classify certain gasoline station assets as held for sale. Impairment charges related to assets held for sale are included in net loss (gain) on sale and disposition of assets in the accompanying consolidated statements of operations.

The Partnership classified 105 sites as held for sale at September 30, ~~2019~~2020 associated with the periodic divestiture of gasoline station sites and the real estate firm coordinated sales discussed above. Impairment charges related to these assets held for sale were ~~immaterial~~$0.6 million and $1.0 million for the three ~~months ended September 30, 2019~~ and ~~$1.3 million for the~~ nine months ended September 30, ~~2019,~~2020, respectively.

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(Unaudited)

The Partnership recorded impairment charges related to assets held for sale associated with the periodic divestiture of gasoline station sites and the real estate firm coordinated sales inwhich were immaterial for the ~~amount of $1.1 million~~three months ended September 30, 2019 and ~~$4.6~~$1.3 million for the ~~three and~~ nine months ended September 30, ~~2018, respectively.~~2019.

Assets held for sale of ~~$5.6~~$2.9 million and ~~$8.1~~$4.6 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are included in property and equipment in the accompanying consolidated balance sheets. Assets held for sale are expected to be sold within the next 12 months.

Other

The Partnership recognizes gains and losses on the sale and disposition of other assets, including vehicles, fixtures and equipment, and the gain or loss on such other assets are included in other in the aforementioned table.

Note 9.8. Debt and Financing Obligations

Credit Agreement

Certain subsidiaries of the Partnership, as borrowers, and the Partnership and certain of its subsidiaries, as guarantors, have a ~~$1.3~~$1.17 billion senior secured credit ~~facility. On April 19, 2019, the Partnership and certain of its subsidiaries entered into the Third Amendment to Third Amended and Restated Credit Agreement~~facility (the “Credit Agreement”) which was amended on May 7, 2020 to, among other things, ~~extended~~provide temporary adjustments to certain covenants and reduce the ~~maturity date~~total aggregate commitment by $130.0 million from $1.3 billion (see “–Fourth Amendment to the Credit Agreement” below). The Credit Agreement matures on April 29, 2022 from April 30, 2020 and reduced by 0.25% the applicable rate under the revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit. All other material terms of the Credit Agreement remain substantially the same as disclosed in Note 7 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2018.2022.

There are ~~two~~2 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 the Partnership’s borrowing base and ~~$850.0~~$770.0 million; and

●

a ~~$450.0~~$400.0 million revolving credit facility to be used for general corporate 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 the Partnership’s 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 2.8% and 4.3% for ~~each of~~ the three months ended September 30, 2020 and 2019, respectively, and ~~2018~~3.0% and 4.5% ~~and 4.1%~~ for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

The Partnership classifies a portion of its working capital revolving credit facility as a current liability and a portion as a long-term liability. The portion classified as a long-term liability represents the amounts expected to be outstanding ~~during~~throughout the ~~entire year~~next twelve months based on an analysis of historical daily borrowings under the working capital revolving credit facility, the seasonality of borrowings, forecasted future working capital requirements and forward product curves, and because the Partnership has a multi-year, long-term commitment from its bank group. Accordingly, at September 30, ~~2019,~~2020 the Partnership estimated working capital revolving credit facility borrowings will equal or exceed ~~$150.0~~$150.0 million over the next twelve months and, therefore, classified ~~$102.9~~$10.1 million as the current portion at September 30, ~~2019,~~2020, representing the amount the Partnership expects to pay down over the next twelve months. The

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

long-term portion of the working capital revolving credit facility was ~~$150.0~~$150.0 million and $175.0 million at ~~both~~ September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and the current portion was ~~$102.9~~$10.1 million and ~~$103.3~~$148.9 million

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The decrease in total borrowings under the working capital revolving credit facility of $163.8 million from December 31, 2019 was in part due to lower prices.

As of September 30, ~~2019,~~2020, the Partnership had total borrowings outstanding under the Credit Agreement of ~~$449.9~~$348.1 million, including ~~$197.0~~ $188.0 million outstanding on the revolving credit facility. In addition, the Partnership had outstanding letters of credit of ~~$68.7~~ $48.5 million. Subject to borrowing base limitations, the total remaining availability for borrowings and letters of credit was ~~$781.4~~$773.4 million and ~~$770.7~~$660.2 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

The Credit Agreement imposes financial covenants that require the Partnership 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. The Partnership was in compliance with the foregoing covenants at September 30, ~~2019.~~2020. 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 the Partnership to its unitholders to the amount of Available Cash (as defined in the Partnership’s partnership agreement).

Please read Note 78 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 for additional information on the Credit Agreement.

Deferred Financing Fees

The Partnership incurs bank fees related to its Credit Agreement and other financing arrangements. These deferred financing fees are capitalized and amortized over the life of the Credit Agreement or other financing arrangements. In connection with the Fourth Amendment (as defined below) in May 2020, the Partnership capitalized additional financing fees of $1.2 million. Also in connection with the Fourth Amendment, the Partnership incurred expenses of approximately $0.7 million associated with the write-off of a portion of the related deferred financing fees for the nine months ended September 30, 2020 which are included in interest expense in the accompanying statement of operations. The Partnership had unamortized deferred financing fees of $14.6 million and $18.0 million at September 30, 2020 and December 31, 2019, respectively.

Unamortized fees related to the Credit Agreement are included in other current assets and other long-term assets and amounted to $5.7 million and $7.8 million at September 30, 2020 and December 31, 2019, respectively. Unamortized fees related to the senior notes are presented as a direct deduction from the carrying amount of that debt liability and amounted to $8.2 million and $9.5 million at September 30, 2020 and December 31, 2019, respectively. Unamortized fees related to the Sale-Leaseback Transaction (defined below) are presented as a direct deduction from the carrying amount of the financing obligation and amounted to $0.7 million at both September 30, 2020 and December 31, 2019.

Amortization expense of approximately $1.3 million and $1.2 million for the three months ended September 30, 2020 and 2019, respectively, and $3.9 million and $3.8 million for the nine months ended September 30, 2020 and 2019, respectively, is included in interest expense in the accompanying consolidated statements of operations.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Supplemental cash flow information

The following table presents supplemental cash flow information related to the Credit Agreement for the periods presented (in thousands):


	Nine Months Ended
	September 30,
	2019		2018

					Nine Months Ended
					September 30,
					2020		2019
Borrowings from working capital revolving credit facility	$	1,290,700	$	1,595,000	$	1,041,600	$	1,290,700
Payments on working capital revolving credit facility		(1,291,100)		(1,414,000)		(1,205,400)		(1,291,100)
Net (payments on) borrowings from working capital revolving credit facility	$	(400)	$	181,000
Net payments on working capital revolving credit facility					$	(163,800)	$	(400)
Borrowings from revolving credit facility	$	—	$	166,000	$	50,000	$	—
Payments on revolving credit facility		(23,000)		(117,800)		(54,700)		(23,000)
Net (payments on) borrowings from revolving credit facility	$	(23,000)	$	48,200
Net payments on revolving credit facility					$	(4,700)	$	(23,000)

~~Senior Notes~~Fourth Amendment to the Credit Agreement

On May 7, 2020, the Partnership and certain of its subsidiaries entered into the Fourth Amendment to Third Amended and Restated Credit Agreement (the “Fourth 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 ~~Partnership had 7.00% senior notes due 2027 (discussed below)~~Fourth Amendment amends certain terms, provisions and ~~7.00% senior notes due 2023 outstanding at September 30, 2019. Please read~~covenants of the Credit Agreement, including, without limitation:

(i)

increases by 0.125% the applicable rate under the working capital facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit;

(ii)

adds 2 pricing levels under the revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit;

(iii)

adds a Eurocurrency rate floor of 0.75% and a cost of funds rate floor of 0.50%;

(iv)

for the four (4) quarters commencing with the quarter ended June 30, 2020, (a) increases to Combined Total Leverage Ratio covenant levels and (b) a reduction to the Combined Interest Coverage Ratio covenant levels; and

(v)

reduces the aggregate commitments under the facilities by 10%, with the commitments under the working capital facility reduced to $770.0 million from $850.0 million and the commitments under the revolving credit facility reduced to $400.0 million from $450.0 million.

All other material terms of the Credit Agreement remain substantially the same as disclosed in Note 78 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019.

Senior Notes

The Partnership had 7.00% senior notes due 2027 and 7.00% senior notes due 2023 outstanding at September 30, 2020. Please read Note 8 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional information on ~~the 7.00%~~these senior ~~notes due 2023.~~

~~7.00% Senior Notes Due 2027~~

notes. On ~~July 31, 2019,~~October 7, 2020, the Issuers issued ~~$400.0~~$350.0 million aggregate principal amount of ~~7.00%~~6.875% senior notes due ~~2027~~2029 to the ~~2027~~2029 Notes Initial Purchasers in a private placement exempt from the registration requirements under the Securities Act. The 2027 Notes were resold by the 2027 Notes Initial Purchasers to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under thePartnership

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(Unaudited)

~~Securities Act. The Partnership~~ used the net proceeds from the offering to fund the ~~repurchase~~redemption of its ~~2022~~2023 Notes ~~in a tender offer~~ and to repay a portion of the borrowings outstanding under its Credit Agreement.

~~On July 31, 2019, the Issuers delivered a Notice of Full Redemption for all of the outstanding 2022~~2029 Notes ~~to Deutsche Bank Trust Company Americas, as trustee. The redemption of the 2022 Notes occurred on August 30, 2019.~~Indenture

As a result of the repurchase of the 2022 Notes, the Partnership recorded a $13.1 million loss from early extinguishment of debt for each of the three and nine months ended September 30, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-off of remaining unamortized original issue discount and deferred financing fees.

~~2027 Note Indenture~~

In connection with the private placement of the ~~2027~~2029 Notes on ~~July 31, 2019,~~October 7, 2020, the Issuers and the subsidiary guarantors and ~~Deutsche~~Regions Bank, ~~Trust Company Americas,~~ as trustee, entered into an indenture (the ~~“2027~~“2029 Notes Indenture”).

The ~~2027~~2029 Notes ~~will~~ mature on ~~August 1, 2027~~January 15, 2029 with interest accruing at a rate of ~~7.00%~~6.875% per ~~annum~~annum. Interest is payable beginning July 15, 2021 and ~~payable~~thereafter semi-annually in arrears on ~~August 1~~January 15 and ~~February 1~~July 15 of each ~~year, commencing February 1, 2020.~~year. The ~~2027~~2029 Notes are guaranteed on a joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent set forth in the ~~2027~~2029 Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal amount of the ~~2027~~2029 Notes may declare the ~~2027~~2029 Notes immediately due and payable, except that an event of default resulting from entry into a bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of the Partnership that is a significant subsidiary or any group of its restricted subsidiaries that, taken together, would constitute a significant subsidiary of the Partnership, will automatically cause the ~~2027~~2029 Notes to become due and payable.

The Issuers ~~will~~ have the option to redeem up to 35% of the ~~2027~~2029 Notes prior to ~~August 1, 2022~~October 15, 2023 at a redemption price (expressed as a percentage of principal amount) of ~~107%~~106.875% plus accrued and unpaid interest, if any. The Issuers ~~will~~ have the option to redeem the ~~2027~~2029 Notes, in whole or in part, at any time on or after ~~August 1, 2022,~~January 15, 2024, at the redemption prices of ~~103.500%~~103.438% for the twelve-month period beginning on ~~August 1, 2022, 102.333%~~January 15, 2024, 102.292% for the twelve-month period beginning ~~August 1, 2023, 101.167%~~January 15, 2025, 101.146% for the twelve-month period beginning ~~August 1, 2024,~~January 15, 2026, and 100% beginning on ~~August 1, 2025~~January 15, 2027 and at any time thereafter, together with any accrued and unpaid interest to the date of redemption. In addition, before ~~August 1, 2022,~~January 15, 2024, the Issuers may redeem all or any part of the ~~2027~~2029 Notes at a redemption price equal to the sum of the principal amount thereof, plus a make whole premium, plus accrued and unpaid interest, if any, to the redemption date. The holders of the ~~2027~~2029 Notes may require the Issuers to repurchase the ~~2027~~2029 Notes following certain asset sales or a Change of Control Triggering Event (as defined in the ~~2027~~2029 Notes Indenture) at the prices and on the terms specified in the ~~2027~~2029 Notes Indenture.

The ~~2027~~2029 Notes Indenture contains covenants that ~~will~~ limit the Partnership’s ability to, among other things, incur additional indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and other restricted payments, restrict distributions by its subsidiaries, create liens, ~~enter into sale-leaseback transactions,~~ sell assets or merge with other entities. Events of default under the ~~2027~~2029 Notes Indenture include (i) a default in payment of principal of, or interest or premium, if any, on, the ~~2027~~2029 Notes, (ii) breach of the Partnership’s covenants under the ~~2027~~2029 Notes Indenture, (iii) certain events of bankruptcy and insolvency, (iv) any payment default or acceleration of indebtedness of the Partnership or certain subsidiaries if the total amount of such indebtedness unpaid or accelerated exceeds ~~$50.0~~$50.0 million and (v) failure to pay within 60 days uninsured final judgments exceeding $50.0 million.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~2027~~2029 Notes Registration Rights Agreement

On ~~July 31, 2019,~~October 7, 2020, the Issuers and the subsidiary guarantors entered into a registration rights agreement (the ~~“2027~~“2029 Notes Registration Rights Agreement”) with the ~~2027~~2029 Notes Initial Purchasers in connection with the Issuers’ private placement of the ~~2027~~2029 Notes. Under the ~~2027~~2029 Notes Registration Rights Agreement, the Issuers and the subsidiary guarantors have agreed to file and use commercially reasonable efforts to cause to become effective a registration statement relating to an offer to exchange the ~~2027~~2029 Notes for an issue of notes with terms identical to the ~~2027~~2029 Notes (except that the exchange notes will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with the ~~2027~~2029 Notes Registration Rights Agreement) that are registered under the Securities Act so as to permit the exchange offer to be consummated by September 23, 2020. Under specified circumstances, the Issuers and the subsidiary guarantors have also agreed to use commercially reasonable efforts to cause to become effective a shelf registration statement relating to resales of the 2027 Notes.December 1, 2021. If the exchange offer is not completed on or before ~~September 23, 2020,~~December 1, 2021, the annual interest rate borne by the ~~2027~~2029 Notes will ~~be increased~~increase by 1.0% per

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(Unaudited)

annum until the exchange offer is completed or ~~the~~a shelf registration statement relating to resales of the 2029 Notes is declared ~~effective (or automatically becomes effective).~~effective.

Financing Obligations

Capitol Acquisition

On June 1, 2015, the Partnership acquired retail gasoline stations and dealer supply contracts from Capitol Petroleum Group (“Capitol”). In connection with the acquisition, the Partnership assumed a financing obligation of ~~$89.6~~$89.6 million associated with ~~two~~2 sale-leaseback transactions by Capitol for 53 leased sites that did not meet the criteria for sale accounting. During the terms of these leases, which expire in May 2028 and September 2029, in lieu of recognizing lease expense for the lease rental payments, the Partnership incurs interest expense associated with the financing obligation. Interest expense of approximately ~~$2.3~~$2.3 million was recorded for each of the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, and $7.0 million was recorded for each of the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, which is included in interest expense in the accompanying consolidated statements of operations. The financing obligation will amortize through expiration of the leases based upon the lease rental payments which were ~~$2.5~~$2.5 million ~~and $2.4 million~~ for each of the three months ended September 30, 2020 and 2019, and ~~2018, respectively,~~$7.6 million and $7.4 ~~million and $7.2~~ million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The financing obligation balance outstanding at September 30, ~~2019~~2020 was ~~$87.1~~ $86.4 million associated with the Capitol acquisition.

Sale-Leaseback Transaction

On June 29, 2016, the Partnership sold to a premier institutional real estate investor (the “Buyer”)real property assets, including the buildings, improvements and appurtenances thereto, at 30 gasoline stations and convenience stores located in Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island ~~(the~~(the “Sale-Leaseback Sites”) for a purchase price of approximately $63.5 million. In connection with the sale, the Partnership entered into a Master Unitary Lease Agreement with the Buyer to lease back the real property assets sold with respect to the Sale-Leaseback Sites (such Master Lease Agreement, together with the Sale-Leaseback Sites, the “Sale-Leaseback Transaction”).

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

$1.2 million ~~and $1.1 million~~ for each of the three months ended September 30, ~~2019~~2020 and ~~2018, respectively,~~2019, and $3.5 million ~~and $3.3 million~~ for each of the nine months ended September 30, ~~2019~~2020 and ~~2018, respectively.~~2019. The financing obligation balance outstanding at September 30, ~~2019~~2020 was ~~$62.4~~$62.1 million associated with the Sale-Leaseback Transaction.

~~Deferred Financing Fees~~

Unamortized fees related to the Credit Agreement are included in other current assets and other long-term assets and amounted to $8.6 million and $5.5 million at September 30, 2019 and December 31, 2018, respectively. Unamortized fees related to the senior notes are presented as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, and amounted to $9.9 million and $4.2 million at September 30, 2019 and December 31, 2018, respectively. Unamortized fees related to the Sale-Leaseback Transaction are presented as a direct deduction from the carrying amount of the financing obligation and amounted to $0.8 million at both September 30, 2019 and December 31, 2018.

On April 19, 2019, the Partnership entered into the Third Amendment to Third Amended and Restated Credit Agreement which, among other things, extended the maturity date from April 30, 2020 to April 29, 2022 and reduced by 0.25% the applicable rate under the existing revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit. As a result, the Partnership incurred expenses of approximately $0.2 million associated with the write-off of a portion of the related deferred financing fees. These expenses are included in interest expense in the accompanying consolidated statements of operations for the nine months ended September 30, 2019.

Amortization expense of approximately $1.2 million and $1.3 million for the three months ended September 30, 2019 and 2018, respectively, and $3.8 million and $4.0 million for the nine months ended September 30, 2019 and 2018, respectively, is included in interest expense in the accompanying consolidated statements of operations.

Note ~~10.~~9. Derivative Financial Instruments

The Partnership principally uses derivative instruments, which include regulated exchange-traded futures and options contracts (collectively, “exchange-traded derivatives”) and physical and financial forwards and over-the-counter (“OTC”) swaps (collectively, “OTC derivatives”), to reduce its exposure to unfavorable changes in commodity market ~~prices and interest rates.~~prices. The Partnership uses these exchange-traded and OTC derivatives to hedge commodity price risk associated with its inventory, fuel purchases and undelivered forward commodity purchases and sales (“physical forward contracts”). The Partnership accounts for derivative transactions in accordance with ASC Topic 815, “Derivatives and Hedging,” and

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(Unaudited)

recognizes derivatives instruments as either assets or liabilities in the consolidated balance sheet and measures those instruments at fair value. The changes in fair value of the derivative transactions are presented currently in earnings, unless specific hedge accounting criteria are met.

The fair value of exchange-traded derivative transactions reflects amounts that would be received from or paid to the Partnership’s brokers upon liquidation of these contracts. The fair value of these exchange-traded derivative transactions is presented on a net basis, offset by the cash balances on deposit with the Partnership’s brokers, presented as brokerage margin deposits in the consolidated balance sheets. The fair value of OTC derivative transactions reflects amounts that would be received from or paid to a third party upon liquidation of these contracts under current market conditions. The fair value of these OTC derivative transactions is presented on a gross basis as derivative assets or

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~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

derivative liabilities in the consolidated balance sheets, unless a legal right of offset exists. The presentation of the change in fair value of the Partnership’s exchange-traded derivatives and OTC derivative transactions depends on the intended use of the derivative and the resulting designation.

The following table summarizes the notional values related to the Partnership’s derivative instruments outstanding at September 30, ~~2019:~~2020:


	Units (1)		Unit of Measure
Exchange-Traded Derivatives
Long		~~68,765~~85,553	Thousands of barrels
Short		~~(72,627)~~(90,087)	Thousands of barrels

OTC Derivatives (Petroleum/Ethanol)
Long		~~9,135~~8,606	Thousands of barrels
Short		~~(7,134)~~(7,666)	Thousands of barrels

(1)

~~(1)~~

Number of open positions and gross notional values do not measure the Partnership’s risk of loss, quantify risk or represent assets or liabilities of the Partnership, but rather indicate the relative size of the derivative instruments and are used in the calculation of the amounts to be exchanged between counterparties upon settlements.

Derivatives Accounted for as Hedges

The Partnership utilizes fair value hedges and cash flow hedges to hedge commodity price ~~risk and interest rate~~ risk.

Fair Value Hedges

Derivatives designated as fair value hedges are used to hedge price risk in commodity inventories and principally include exchange-traded futures contracts that are entered into in the ordinary course of business. For a derivative instrument designated as a fair value hedge, the gain or loss is recognized in earnings in the period of change together with the offsetting change in fair value on the hedged item of the risk being hedged. Gains and losses related to fair value hedges are recognized in the consolidated ~~statement~~statements of operations through cost of sales. These futures contracts are settled on a daily basis by the Partnership through brokerage margin accounts.

The Partnership’s fair value hedges include exchange-traded futures contracts and OTC derivative contracts that are hedges against inventory with specific futures contracts matched to specific barrels. The change in fair value of these futures contracts and the change in fair value of the underlying inventory generally provide an offset to each other in the consolidated ~~statement~~statements of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the gains and losses from the Partnership’s derivative instruments involved in fair value hedging relationships recognized in the consolidated statements of operations for the periods presented (in thousands):


	Statement of Gain (Loss)	Three Months Ended				Nine Months Ended
	Recognized in Income on	September 30,				September 30,
	Derivatives	2019		2018		2019		2018

										Statement of Gain (Loss)	Three Months Ended				Nine Months Ended
										Recognized in Income on	September 30,				September 30,
										Derivatives	2020		2019		2020		2019
Derivatives in fair value hedging relationship
Exchange-traded futures contracts and OTC derivative contracts for petroleum commodity products	Cost of sales	$	2,634	$	(12,776)	$	3,872	$	(22,507)	Cost of sales	$	(8,054)	$	2,634	$	(6,356)	$	3,872


Hedged items in fair value hedge relationship
Physical inventory	Cost of sales	$	(2,136)	$	12,786	$	(5,121)	$	24,160	Cost of sales	$	9,456	$	(2,136)	$	3,299	$	(5,121)

Cash Flow Hedges

The Partnership’s sales and cost of sales fluctuate with changes in commodity prices. In addition to the Partnership’s commodity price risk associated with its inventory and undelivered forward commodity purchases and sales, the Partnership’s gross profit may fluctuate in periods where commodity prices are rising or declining depending on the magnitude and duration of the commodity price change. In the Partnership’s GDSO segment, the Partnership has observed trends where margins may improve in periods where wholesale gasoline prices are declining and margins may compress during periods where wholesale gasoline prices are rising. Additionally, the Partnership has certain operating costs that are indirectly impacted by fluctuations in commodity prices such that its operating costs may increase during periods where margins compress and, conversely, operating costs may decrease during periods where margins improve. To hedge the Partnership’s cash flow risk as a result of this observed trend in the GDSO segment, the Partnership has entered into exchange-traded commodity swap contracts and has designated them as a cash flow hedge of its fuel purchases designed to reduce its cost of fuel if market prices rise through 2021 or increase its cost of fuel if market prices decrease through 2021. For a derivative instrument being designated as a cash flow hedge, the effective portion of the derivative gain or loss is initially reported as a component of other comprehensive income (loss) and subsequently reclassified into the consolidated statement of income through cost of goods sold in the same period that the hedged exposure affects earnings.

The amount of gain (loss) recognized in other comprehensive income for derivatives designated in cash flow hedging relationships was $1.5 million and $6.9 million for the three and nine months ended September 30, 2020, respectively. The amount of gain (loss) reclassified from other comprehensive income into cost of sales for derivatives designated in cash flow hedging relationships was $1.0 million and $1.2 million for the three and nine months ended September 30, 2020, respectively. The amount of gain (loss) recognized in other comprehensive income as of September 30, 2020 and expected to be reclassified into earnings within the next 12 months is $4.7 million.

Derivatives Not Accounted for as Hedges

The Partnership utilizes petroleum and ethanol commodity contracts ~~and foreign currency derivatives~~ to hedge price and currency risk in certain commodity inventories and physical forward contracts.

Petroleum and Ethanol Commodity Contracts

The Partnership uses exchange-traded derivative contracts to hedge price risk in certain commodity inventories which do not qualify for fair value hedge accounting or are not designated by the Partnership as fair value hedges. Additionally, the Partnership uses exchange-traded derivative contracts, and occasionally financial forward and OTC swap agreements, to hedge commodity price exposure associated with its physical forward contracts which are not designated by the Partnership as cash flow hedges. These physical forward contracts, to the extent they meet the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

definition of a derivative, are considered OTC physical forwards and are reflected as derivative assets or derivative liabilities in the consolidated balance sheet. The related exchange-traded derivative contracts (and financial forward and OTC swaps, if applicable) are also reflected as brokerage margin deposits (and derivative assets or derivative liabilities, if applicable) in the consolidated balance sheet, thereby creating an economic hedge. Changes in fair value of these derivative instruments are recognized in the consolidated ~~statement~~statements of operations through cost of sales. These exchange-traded derivatives are settled on a daily basis by the Partnership through brokerage margin accounts.

While the Partnership seeks to maintain a position that is substantially balanced within its commodity product purchase and sale activities, it may experience net unbalanced positions for short periods of time as a result of variances in daily purchases and sales and transportation and delivery schedules as well as other logistical issues inherent in the businesses, such as weather conditions. In connection with managing these positions, the Partnership is aided by maintaining a constant presence in the marketplace. The Partnership also engages in a controlled trading program for up to an aggregate of 250,000 barrels of commodity products at any one point in time. Changes in fair value of these derivative instruments are recognized in the consolidated ~~statement~~statements of operations through cost of sales.

The following table presents the gains and losses from the Partnership’s derivative instruments not involved in a hedging relationship recognized in the consolidated statements of operations for the periods presented (in thousands):


	Statement of Gain (Loss)	Three Months Ended				Nine Months Ended

										Statement of Gain (Loss)	Three Months Ended				Nine Months Ended
Derivatives not designated as	Recognized in	September 30,				September 30,				Recognized in	September 30,				September 30,
hedging instruments	Income on Derivatives	2019		2018		2019		2018		Income on Derivatives	2020		2019		2020		2019
Commodity contracts	Cost of sales	$	3,204	$	(1,162)	$	18,329	$	2,411	Cost of sales	$	2,219	$	3,204	$	6,285	$	18,329

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~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Margin Deposits

All of the Partnership’s exchange-traded derivative contracts (designated and not designated) are transacted through clearing brokers. The Partnership deposits initial margin with the clearing brokers, along with variation margin, which is paid or received on a daily basis, based upon the changes in fair value of open futures contracts and settlement of closed futures contracts. Cash balances on deposit with clearing brokers and open equity are presented on a net basis within brokerage margin deposits in the consolidated balance sheets.

Commodity Contracts and Other Derivative Activity

The Partnership’s commodity contracts and other derivative activity include: (i) exchange-traded derivative contracts that are hedges against inventory and either do not qualify for hedge accounting or are not designated in a hedge accounting relationship, (ii) exchange-traded derivative contracts used to economically hedge physical forward contracts, (iii) financial forward and OTC swap agreements used to economically hedge physical forward contracts and (iv) the derivative instruments under the Partnership’s controlled trading program. The Partnership does not take the normal purchase and sale exemption available under ASC 815 for any of its physical forward contracts.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the fair value of each classification of the Partnership’s derivative instruments and its location in the consolidated balance sheets at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):


		September 30, 2019
		Derivatives		Derivatives Not
		Designated as		Designated as
		Hedging		Hedging
	Balance Sheet Location	Instruments		Instruments		Total

									September 30, 2020
									Derivatives		Derivatives Not
									Designated as		Designated as
									Hedging		Hedging
								Balance Sheet Location	Instruments		Instruments		Total
Asset Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	2,389	$	48,729	$	51,118	Broker margin deposits	$	6,001	$	58,032	$	64,033
Forward derivative contracts (1)	Derivative assets		—		9,198		9,198	Derivative assets		—		43,159		43,159
Total asset derivatives		$	2,389	$	57,927	$	60,316		$	6,001	$	101,191	$	107,192


Liability Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	—	$	(17,625)	$	(17,625)	Broker margin deposits	$	(6,915)	$	(62,233)	$	(69,148)
Forward derivative contracts (1)	Derivative liabilities		—		(7,908)		(7,908)	Derivative liabilities		—		(6,589)		(6,589)
Total liability derivatives		$	—	$	(25,533)	$	(25,533)		$	(6,915)	$	(68,822)	$	(75,737)


		December 31, 2019
		Derivatives		Derivatives Not
		Designated as		Designated as
		Hedging		Hedging
	Balance Sheet Location	Instruments		Instruments		Total
Asset Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	—	$	31,645	$	31,645
Forward derivative contracts (1)	Derivative assets		—		4,564		4,564
Total asset derivatives		$	—	$	36,209	$	36,209

Liability Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	(3,838)	$	(26,354)	$	(30,192)
Forward derivative contracts (1)	Derivative liabilities		—		(12,698)		(12,698)
Total liability derivatives		$	(3,838)	$	(39,052)	$	(42,890)

December 31, 2018

Derivatives

Derivatives Not

Designated as

Designated as

Hedging

Hedging

Balance Sheet Location

Instruments

Instruments

Total

Asset Derivatives:












Exchange-traded derivative contracts

Broker margin deposits

$
5,121

$
120,992

$
126,113

Forward derivative contracts (1)

Derivative assets

—

26,390

26,390

Total asset derivatives

$
5,121

$
147,382

$
152,503

Liability Derivatives:



Exchange-traded derivative contracts

Broker margin deposits

$
—

$
(42,496)

$
(42,496)

Forward derivative contracts (1)

Derivative liabilities

—

(4,494)

(4,494)

Total liability derivatives

$
—

$
(46,990)

$
(46,990)

(1)

~~(1)~~

Forward derivative contracts include the Partnership’s petroleum and ethanol physical and financial forwards and OTC swaps.

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~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Credit Risk

The Partnership’s derivative financial instruments do not contain credit risk related to other contingent features that could cause accelerated payments when these financial instruments are in net liability positions.

The Partnership is exposed to credit loss in the event of nonperformance by counterparties to the Partnership’s exchange-traded and OTC derivative contracts, but the Partnership has no current reason to expect any material nonperformance by any of these counterparties. Exchange-traded derivative contracts, the primary derivative instrument utilized by the Partnership, are traded on regulated exchanges, greatly reducing potential credit risks. The Partnership utilizes major financial institutions as its clearing brokers for all New York Mercantile Exchange (“NYMEX”), Chicago Mercantile Exchange (“CME”) and Intercontinental Exchange (“ICE”) derivative transactions and the right of offset exists with these financial institutions under master netting agreements. Accordingly, the fair value of the Partnership’s exchange-traded derivative instruments is presented on a net basis in the consolidated balance sheets. Exposure on OTC derivatives is limited to the amount of the recorded fair value as of the balance sheet dates.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note ~~11.~~10. Fair Value Measurements

The following tables present, by level within the fair value hierarchy, the Partnership’s financial assets and liabilities that were measured at fair value on a recurring basis as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):


	Fair Value at September 30, 2019
							Cash Collateral
	Level 1		Level 2		Level 3		Netting		Total

											Fair Value at September 30, 2020
																	Cash Collateral
											Level 1		Level 2		Level 3		Netting		Total
Assets:
Forward derivative contracts (1)	$	—	$	8,422	$	776	$	—	$	9,198	$	—	$	43,122	$	37	$	—	$	43,159
Exchange-traded/cleared derivative instruments (2)		33,493		—		—		(8,777)		24,716		(5,115)		—		—		28,570		23,455
Pension plans		18,509		—		—		—		18,509		17,820		—		—		—		17,820
Total assets	$	52,002	$	8,422	$	776	$	(8,777)	$	52,423	$	12,705	$	43,122	$	37	$	28,570	$	84,434


Liabilities:
Forward derivative contracts (1)	$	—	$	(7,491)	$	(417)	$	—	$	(7,908)	$	—	$	(6,538)	$	(51)	$	—	$	(6,589)


	Fair Value at December 31, 2019
							Cash Collateral
	Level 1		Level 2		Level 3		Netting		Total
Assets:
Forward derivative contracts (1)	$	—	$	4,002	$	562	$	—	$	4,564
Exchange-traded/cleared derivative instruments (2)		1,453		—		—		33,013		34,466
Pension plans		17,099		—		—		—		17,099
Total assets	$	18,552	$	4,002	$	562	$	33,013	$	56,129

Liabilities:
Forward derivative contracts (1)	$	—	$	(12,112)	$	(586)	$	—	$	(12,698)

Fair Value at December 31, 2018

Cash Collateral


Level 1

Level 2

Level 3

Netting

Total

Assets:

Forward derivative contracts (1)

$
—

$
25,504

$
886

$
—

$
26,390

Exchange-traded/cleared derivative instruments (2)

83,617

—

—

(68,851)

14,766

Pension plans

15,800

—

—

—

15,800

Total assets

$
99,417

$
25,504

$
886

$
(68,851)

$
56,956

Liabilities:

Forward derivative contracts (1)

$
—

$
(3,878)

$
(616)

$
—

$
(4,494)

(1)

~~(1)~~

Forward derivative contracts include the Partnership’s petroleum and ethanol physical and financial forwards and OTC swaps.

(2)

~~(2)~~

Amount includes the effect of cash balances on deposit with clearing brokers.

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

This table excludes cash on hand and assets and liabilities that are measured at historical cost or any basis other than fair value. The carrying amounts of certain of the Partnership’s financial instruments, including cash equivalents, accounts receivable, accounts payable and other accrued liabilities approximate fair value due to their short maturities. The carrying value of the credit facility approximates fair value due to the variable rate nature of these financial instruments.

The carrying value of the inventory qualifying for fair value hedge accounting approximates fair value due to adjustments for changes in fair value of the hedged item. The fair values of the derivatives used by the Partnership are disclosed in Note ~~10.~~9.

The determination of the fair values above incorporates factors including not only the credit standing of the counterparties involved, but also the impact of the Partnership’s nonperformance risks on its liabilities.

The Partnership estimates the fair values of its senior notes using a combination of quoted market prices for similar financing arrangements and expected future payments discounted at risk-adjusted rates, which are considered

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Level 2 inputs. The fair values of the senior notes, estimated by observing market trading prices of the respective senior notes, were as follows (in thousands):


	September 30, 2019				December 31, 2018
	Face		Fair		Face		Fair
	Value		Value		Value		Value
6.25% senior notes due 2022	$	—	$	—	$	375,000	$	363,750

									September 30, 2020				December 31, 2019
									Face		Fair		Face		Fair
									Value		Value		Value		Value
7.00% senior notes due 2023	$	300,000	$	307,500	$	300,000	$	294,000	$	300,000	$	306,000	$	300,000	$	309,000
7.00% senior notes due 2027	$	400,000	$	410,000	$	—	$	—	$	400,000	$	406,000	$	400,000	$	423,000

Level 3 Information

The values of the Level 3 derivative contracts were calculated using market approaches based on a combination of observable and unobservable market inputs, including published and quoted NYMEX, CME, ICE, New York Harbor and third-party pricing information for a component of the underlying instruments as well as internally developed assumptions where there is little, if any, published or quoted prices or market activity.

The unobservable inputs used in the measurement of the Level 3 derivative contracts include estimates for location basis, transportation and throughput costs net of an estimated margin for current market participants. The ~~estimates~~estimated range and weighted average for these inputs include the following:


	September 30, 2020						December 31, 2019
	Low		High		Weighted		Low		High		Weighted
Product	($ per barrel)		($ per barrel)		Average		($ per barrel)		($ per barrel)		Average
Crude oil	$	(3.60)	$	(3.55)	$	(3.57)	$	(4.95)	$	(3.25)	$	(4.88)
Propane	$	—	$	—	$	—	$	0.84	$	15.54	$	11.04

The respective weighted averages were calculated by weighting the contractual volumes of the location basis, transportation and throughput costs net of an estimated margin for ~~crude oil~~current market participants. The Partnership ceased marketing propane during the quarter ended June 30, 2020 and, therefore, inputs were ~~($6.35) to ($2.00) per barrel and ($3.25) to $2.00 per barrel as of~~not required at September 30, 2019 and December 31, 2018, respectively. The estimates for these inputs for propane were $4.20 to $8.82 per barrel and $0.02 to $0.25 per barrel as of September 30, 2019 and December 31, 2018, respectively.2020. Gains and losses recognized in earnings (or changes in net assets) are disclosed in Note ~~10.~~9.

~~Sensitivity of the fair value measurement to~~Uncertainty in changes in the significant unobservable inputs to the fair value measurement if those inputs reasonably could have been different at the reporting date is as follows:


Significant			ImpactonFairValue
~~Significant~~Unobservable Input	Position	ChangetoInput	~~Impact~~on~~FairValue~~Measurement
~~Unobservable Input~~	~~Position~~	~~Change~~to~~Input~~	~~Measurement~~
Location basis	Long	Increase(decrease)	Gain (loss)
Location basis	Short	Increase(decrease)	Loss (gain)
Transportation	Long	Increase(decrease)	Gain (loss)
Transportation	Short	Increase(decrease)	Loss (gain)
Throughput costs	Long	Increase(decrease)	Gain (loss)
Throughput costs	Short	Increase(decrease)	Loss(gain)

3129

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents a reconciliation of changes in fair value of the Partnership’s derivative contracts classified as Level 3 in the fair value hierarchy at September 30, ~~2019~~2020 (in thousands):

Fair value at December 31, 2018

$
270

Derivatives entered into during the period

547

Derivatives sold during the period

(140)

Realized gains (losses) recorded in cost of sales

(238)

Unrealized gains (losses) recorded in cost of sales

(80)

Fair value at September 30, 2019

$
359


Fair value at December 31, 2019	$	(24)
Derivatives entered into during the period		22
Derivatives sold during the period		(36)
Realized gains (losses) recorded in cost of sales		24
Fair value at September 30, 2020	$	(14)

The Partnership’s policy is to recognize transfers between levels with the fair value hierarchy as of the beginning of the reporting period. The Partnership also excludes any activity for derivative instruments that were not classified as Level 3 at either the beginning or end of the reporting period.

Non-Recurring Fair Value Measures

Certain nonfinancial assets and liabilities are measured at fair value on a non-recurring basis and are subject to fair value adjustments in certain circumstances, such as acquired assets and liabilities, losses related to firm non-cancellable purchase commitments or long-lived assets subject to impairment. For assets and liabilities measured on a non-recurring basis during the period, accounting guidance requires quantitative disclosures about the fair value measurements separately for each major category. See Note 87 for a discussion of the Partnership’s assets held for ~~sale and Note 17 for acquired assets and liabilities measured on a non-recurring basis.~~sale.

Note ~~12.~~11. Environmental Liabilities and Renewable Identification Numbers

Environmental Liabilities

The following table presents a summary roll forward of the Partnership’s environmental liabilities at September 30, ~~2019~~2020 (in thousands):


	Balance at						Other		Balance at
	December 31,		Payments		Dispositions		Adjustments		September 30,

											Balance at						Other		Balance at
											December 31,		Payments		Dispositions		Adjustments		September 30,
Environmental Liability Related to:	2018		2019		2019		2019		2019		2019		2020		2020		2020		2020
Retail gasoline stations	$	59,133	$	(1,978)	$	(1,050)	$	674	$	56,779	$	55,493	$	(2,010)	$	(918)	$	(813)	$	51,752
Terminals		4,091		(266)		—		—		3,825		3,778		(105)		—		—		3,673
Total environmental liabilities	$	63,224	$	(2,244)	$	(1,050)	$	674	$	60,604	$	59,271	$	(2,115)	$	(918)	$	(813)	$	55,425
Current portion	$	6,092							$	6,092	$	5,009							$	5,009
Long-term portion		57,132								54,512		54,262								50,416
Total environmental liabilities	$	63,224							$	60,604	$	59,271							$	55,425

The Partnership’s estimates used in these environmental liabilities are based on all known facts at the time and its assessment of the ultimate remedial action outcomes. Among the many uncertainties that impact the Partnership’s estimates are the necessary regulatory approvals for, and potential modification of, its remediation plans, the amount of data available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental remediation services and equipment, relief of obligations through divestitures of sites and the possibility of existing legal claims giving rise to additional claims. Dispositions generally represent relief of legal obligations through the sale of the related property with no retained obligation. Other adjustments generally represent changes in estimates for existing obligations or obligations associated with new sites. Therefore, although the Partnership believes that these environmental liabilities are adequate, no assurances can be made that any costs incurred in excess of these

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

environmental liabilities or outside of indemnifications or not otherwise covered by insurance would not have a material adverse effect on the Partnership’s financial condition, results of operations or cash flows.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Renewable Identification Numbers (RINs)

A RIN is a serial number assigned to a batch of renewable fuel for the purpose of tracking its production, use and trading as required by the U.S. Environmental Protection Agency’s (“EPA”) Renewable Fuel Standard that originated with the Energy Policy Act of 2005 and modified by the Energy Independence and Security Act of 2007. To evidence that the required volume of renewable fuel is blended with gasoline and diesel motor vehicle fuels, obligated parties must retire sufficient RINs to cover their Renewable Volume Obligation (“RVO”). The Partnership’s EPA obligations relative to renewable fuel reporting are comprised of foreign gasoline and diesel that the Partnership may import and blending operations at certain facilities. As a wholesaler of transportation fuels through its terminals, the Partnership separates RINs from renewable fuel through blending with gasoline and can use those separated RINs to settle its RVO. While the annual compliance period for the RVO is a calendar year and the settlement of the RVO typically occurs by March 31 of the following year, the settlement of the RVO can occur, under certain EPA deferral actions, more than one year after the close of the compliance period.

The Partnership’s Wholesale segment’s operating results may be sensitive to the timing associated with its RIN position relative to its RVO at a point in time, and the Partnership may recognize a mark-to-market liability for a shortfall in RINs at the end of each reporting period. To the extent that the Partnership does not have a sufficient number of RINs to satisfy the RVO as of the balance sheet date, the Partnership charges cost of sales for such deficiency based on the market price of the RINs as of the balance sheet date and records a liability representing the Partnership’s obligation to purchase RINs. The Partnership’s RVO deficiency was ~~$0.7~~$1.4 million and ~~$0.6~~$0.9 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

The Partnership may enter into RIN forward purchase and sales commitments. Total losses from firm non-cancellable commitments were immaterial at both September 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Note ~~13.~~12. Related Party Transactions

The Partnership is a party to a Second Amended and Restated Services Agreement with Global Petroleum Corp. (“GPC”), an affiliate of the Partnership that is 100% owned by members of the Slifka family, pursuant to which the Partnership provides GPC with certain tax, accounting, treasury, legal, information technology, human resources and financial operations support services for which GPC pays the Partnership a monthly services fee at an agreed amount subject to the approval by the Conflicts Committee of the board of directors of the General Partner. The Second Amended and Restated Services Agreement is for an indefinite term and any party may terminate some or all of the services upon ninety (90) days’ advanced written notice. As of September 30, ~~2019,~~2020, no such notice of termination was given by GPC or the Partnership.

The General Partner employs substantially all of the Partnership’s employees, except for most of its gasoline station and convenience store employees, who are employed by GMG. The Partnership reimburses the General Partner for expenses incurred in connection with these employees. These expenses, including bonus, payroll and payroll taxes, were ~~$33.4~~$29.7 million and ~~$25.2~~$33.4 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$91.4~~$99.9 million and ~~$77.1~~$91.4 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The Partnership also reimburses the General Partner for its contributions under the General Partner’s 401(k) Savings and Profit Sharing Plans and the General Partner’s qualified and non-qualified pension plans.

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(Unaudited)

The table below presents receivables from GPC and the General Partner (in thousands):


	September 30,		December 31,
	2020		2019
Receivables from GPC	$	28	$	53
Receivables from the General Partner (1)		5,254		7,770
Total	$	5,282	$	7,823

September 30,

December 31,

2019

2018

Receivables from GPC

$
43

$
23

Receivables from the General Partner (1)

7,389

5,412

Total

$
7,432

$
5,435

(1)

~~(1)~~

Receivables from the General Partner reflect the Partnership’s prepayment of payroll taxes and payroll accruals to the General Partner and are due to the timing of the payroll obligations.

In addition, the Partnership paid certain costs in connection with a compensation funding agreement with the General Partner. See Note ~~14,~~13, “Long-Term Incentive Plan–Repurchase Program.”

Note ~~14.~~13. Long-Term Incentive Plan

The Partnership has a Long-Term Incentive Plan, as amended (the “LTIP”), whereby a total of 4,300,000 common units were authorized for delivery with respect to awards under the LTIP. The LTIP provides for awards to employees, consultants and directors of the General Partner and employees and consultants of affiliates of the Partnership who perform services for the Partnership. The LTIP allows for the award of options, unit appreciation rights, restricted units, phantom units, distribution equivalent rights, unit awards and substitute awards. Awards granted pursuant to the LTIP vest pursuant to the terms of the grant agreements. Please read Note 1617 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 for additional information on the LTIP.

The following table presents a summary of the non-vested phantom units granted under the LTIP:


		Weighted
	Number of	Average
	Non-vested	Grant Date
	Units	Fair Value ($)
Outstanding non—vested phantom units at December 31, 2018	730,141	13.57

				Weighted
			Number of	Average
			Non-vested	Grant Date
			Units	Fair Value ($)
Outstanding non—vested phantom units at December 31, 2019			562,906	9.74
Vested	(146,806)	27.54	(152,635)	10.41
Forfeited	(18,393)	18.66	(6,867)	11.31
Outstanding non—vested phantom units at September 30, 2019	564,942	9.77
Outstanding non—vested phantom units at September 30, 2020			403,404	9.46

The Partnership recorded total compensation expense related to the outstanding LTIP awards of ~~$0.1~~$0.2 million and ~~$1.2~~$0.1 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$1.7~~$0.8 million and ~~$3.6~~$1.7 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

The total compensation cost related to the non-vested awards not yet recognized at September 30, ~~2019~~2020 was approximately ~~$3.0~~$1.8 million and is expected to be recognized ratably over the remaining requisite service periods.

Repurchase Program

In May 2009, the board of directors of the General Partner authorized the repurchase of the Partnership’s common units (the “Repurchase Program”) for the purpose of meeting the General Partner’s anticipated obligations to deliver common units under the LTIP and meeting the General Partner’s obligations under existing employment agreements and other employment related obligations of the General Partner (collectively, the “General Partner’s Obligations”). The

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

General Partner is authorized to acquire up to 1,242,427 of its common units in the aggregate over an extended period of

Table of Contents

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

time, consistent with the General Partner’s Obligations. Common units may be repurchased from time to time in open market transactions, including block purchases, or in privately negotiated transactions. Such authorized unit repurchases may be modified, suspended or terminated at any time and are subject to price and economic and market conditions, applicable legal requirements and available liquidity. Since the Repurchase Program was implemented, the General Partner repurchased ~~838,505~~868,505 common units pursuant to the Repurchase Program for approximately ~~$24.8~~$25.1 million, ~~none~~ of which approximately $0 and $0.3 million were purchased during the three and nine months ended September 30, ~~2019.~~2020, respectively.

In June 2009, the Partnership and the General Partner entered into the Global GP LLC Compensation Funding Agreement (the “Agreement”) whereby the Partnership and the General Partner established obligations and protocol for (i) the funding, management and administration of a compensation funding account and underlying General Partner’s Obligations, and (ii) the holding and disposition by the General Partner of common units acquired in accordance with the Agreement for such purposes as otherwise set forth in the Agreement. The Agreement requires the Partnership to fund costs that the General Partner incurs in connection with performance of the Agreement. In accordance with the Agreement, the Partnership paid members of the General Partner $0$0 for each of the three months ended September 30, ~~2019~~2020 and ~~2018~~2019, and $0.3 million ~~and $0.4 million~~in the aggregate for each of the nine months ended September 30, ~~2019~~2020 and ~~2018, respectively.~~2019.

Note ~~15.~~14. Partners’ Equity and Cash Distributions

Partners’ Equity

Common Units and General Partner Interest

At September 30, ~~2019~~2020, there were 33,995,563 common units issued, including ~~7,403,699~~5,239,245 common units held by affiliates of the General Partner, including directors and executive officers, collectively representing a 99.33% limited partner interest in the Partnership, and 230,303 general partner units representing a 0.67% general partner interest in the Partnership. There have been no changes to common units or the general partner interest during the three and nine months ended September 30, ~~2019.~~ 2020.

Series A Preferred Units

~~On August 7, 2018, the Partnership issued~~At September 30, 2020, there were 2,760,000 9.75% SeriesA Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units ~~with a liquidation preference of $25.00 per unit~~issued representing limited partner interests (the “SeriesA Preferred Units”), for $25.00 per SeriesA Preferred Unit. There have been no changes to the Series A Preferred Units during the three and nine months ended September 30, ~~2019.~~2020.

Cash Distributions

Common Units

The Partnership intends to make cash distributions to common unitholders on a quarterly basis, although there is no assurance as to the future cash distributions since they are dependent upon future earnings, capital requirements, financial condition and other factors. The Credit Agreement prohibits the Partnership from making cash distributions if any potential default or Event of Default, as defined in the Credit Agreement, occurs or would result from the cash distribution. The indentures governing the Partnership’s outstanding senior notes also limit the Partnership’s ability to make distributions to its common unitholders in certain circumstances.

Within 45 days after the end of each quarter, the Partnership will distribute all of its Available Cash (as defined in its partnership agreement) to common unitholders of record on the applicable record date. The amount of Available Cash is all cash on hand on the date of determination of Available Cash for the quarter; less the amount of cash reserves

3533

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

established by the General Partner to provide for the proper conduct of the Partnership’s businesses, to comply with applicable law, any of the Partnership’s debt instruments or other agreements or to provide funds for distributions to unitholders and the General Partner for any one or more of the next ~~four~~4 quarters.

The Partnership will make distributions of Available Cash from distributable cash flow for any quarter in the following manner: 99.33% to the common unitholders, pro rata, and 0.67% to the General Partner, until the Partnership distributes for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and thereafter, cash in excess of the minimum quarterly distribution is distributed to the common unitholders and the General Partner based on the percentages as provided below.

As holder of the IDRs, the General Partner is entitled to incentive distributions if the amount that the Partnership distributes with respect to any quarter exceeds specified target levels shown below:


			Marginal Percentage
	Total Quarterly Distribution		Interest in Distributions
	Target Amount		Unitholders		General Partner

									Marginal Percentage
							Total Quarterly Distribution		Interest in Distributions
							Target Amount		Unitholders		General Partner
First Target Distribution		up to $0.4625	99.33	%	0.67	%		up to $0.4625	99.33	%	0.67	%
Second Target Distribution		above $0.4625 up to $0.5375	86.33	%	13.67	%		above $0.4625 up to $0.5375	86.33	%	13.67	%
Third Target Distribution		above $0.5375 up to $0.6625	76.33	%	23.67	%		above $0.5375 up to $0.6625	76.33	%	23.67	%
Thereafter		above $0.6625	51.33	%	48.67	%		above $0.6625	51.33	%	48.67	%

The Partnership paid the following cash distributions to common unitholders during ~~2019~~2020 (in thousands, except per unit data):

Earned for the

Per Unit








Cash Distribution

Quarter

Cash

Common

General

Incentive

Total Cash

Payment Date

Ended

Distribution

Units

Partner

Distribution

Distribution

2/14/2019

12/31/18

$
0.5000

$
16,998

$
115

$
202

$
17,315

5/15/2019

03/31/19

0.5100

17,338

117

256

17,711

8/14/2019

06/30/19

0.5150

17,508

118

269

17,895


	For the	Per Unit
Cash Distribution	Quarter	Cash		Common		General		Incentive		Total Cash
Payment Date	Ended	Distribution		Units		Partner		Distribution		Distribution
2/14/2020	12/31/19	$	0.52500	$	17,848	$	123	$	320	$	18,291
5/15/2020	03/31/20		0.39375		13,385		91		—		13,476
8/14/2020	06/30/20		0.45875		15,595		106		—		15,701

In addition, on October ~~25, 2019,~~26, 2020, the board of directors of the General Partner declared a quarterly cash distribution of ~~$0.52~~$0.50 per unit ($~~2.08~~2.00 per unit on an annualized basis) on all of its outstanding common units for the period from July 1, ~~2019~~2020 through September 30, ~~2019.~~2020. On November ~~14, 2019,~~13, 2020, the Partnership will pay this cash distribution to its common unitholders of record as of the close of business on November ~~8, 2019.~~ 9, 2020.

Series A Preferred Units

Distributions on the Series A Preferred Units are cumulative from August 7, 2018, the original issue date of the Series A Preferred Units, and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year, commencing on November 15, 2018 (each, a “Distribution Payment Date”), to holders of record as of the opening of business on the February 1, May 1, August 1 or November 1 next preceding the Distribution Payment Date, in each case, when, as, and if declared by the General Partner out of legally available funds for such purpose. Distributions on the Series A Preferred Units will be paid out of Available Cash with respect to the quarter immediately preceding the applicable Distribution Payment Date.

3634

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Partnership paid the following cash distributions on the Series A Preferred Units during ~~2019~~2020 (in thousands, except per unit data):

Earned for the

Per Unit


Cash Distribution

Quarterly Period

Cash

Total Cash

Payment Date

Covering

Distribution

Distribution

2/15/2019

11/15/18 - 2/14/19

$
0.609375

$
1,682

5/15/2019

2/15/19 - 5/14/19

0.609375

1,682

8/15/2019

5/15/19 - 8/14/19

0.609375

1,682


	For the	Per Unit
Cash Distribution	Quarterly Period	Cash		Total Cash
Payment Date	Covering	Distribution		Distribution
2/18/2020	11/15/19 - 2/14/20	$	0.609375	$	1,682
5/15/2020	2/15/20 - 5/14/20		0.609375		1,682
8/17/2020	5/15/20 - 8/14/20		0.609375		1,682

In addition, on October ~~22, 2019,~~19, 2020, the board of directors of the 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 from August 15, ~~2019~~2020 through November 14, ~~2019.~~2020. This distribution will be payable on November ~~15, 2019~~ 16, 2020 to holders of record as of the opening of business on November ~~1, 2019.~~2, 2020.

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Note ~~16.~~15. Segment Reporting

Summarized financial information for the Partnership’s reportable segments is presented in the table below (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Wholesale Segment:
Sales
Gasoline and gasoline blendstocks	$	767,538	$	1,466,111	$	2,182,321	$	4,106,434
Crude oil (1)		57,518		13,646		73,010		56,174
Other oils and related products (2)		235,359		312,534		1,069,921		1,343,417
Total	$	1,060,415	$	1,792,291	$	3,325,252	$	5,506,025
Product margin
Gasoline and gasoline blendstocks	$	16,318	$	20,194	$	83,241	$	76,568
Crude oil (1)		(2,729)		(3,019)		2,004		(10,043)
Other oils and related products (2)		14,031		17,071		58,764		40,566
Total	$	27,620	$	34,246	$	144,009	$	107,091
Gasoline Distribution and Station Operations Segment:
Sales
Gasoline	$	696,184	$	1,010,655	$	1,896,960	$	2,866,496
Station operations (3)		122,856		128,942		325,577		354,127
Total	$	819,040	$	1,139,597	$	2,222,537	$	3,220,623
Product margin
Gasoline	$	101,405	$	107,620	$	305,405	$	282,919
Station operations (3)		57,462		61,109		154,904		169,621
Total	$	158,867	$	168,729	$	460,309	$	452,540
Commercial Segment:
Sales	$	181,927	$	313,765	$	578,263	$	1,006,171
Product margin	$	2,855	$	7,213	$	11,773	$	18,217
Combined sales and Product margin:
Sales	$	2,061,382	$	3,245,653	$	6,126,052	$	9,732,819
Product margin (4)	$	189,342	$	210,188	$	616,091	$	577,848
Depreciation allocated to cost of sales		(20,101)		(22,419)		(61,165)		(66,092)
Combined gross profit	$	169,241	$	187,769	$	554,926	$	511,756

Three Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018

2019

2018

Wholesale Segment:

Sales

Gasoline and gasoline blendstocks

$
1,466,111

$
1,594,543

$
4,106,434

$
3,615,862

Crude oil (1)

13,646

15,643

56,174

74,047

Other oils and related products (2)

312,534

279,467

1,343,417

1,372,042

Total

$
1,792,291

$
1,889,653

$
5,506,025

$
5,061,951

Product margin

Gasoline and gasoline blendstocks

$
20,194

$
5,586

$
76,568

$
54,423

Crude oil (1)

(3,019)

(7,606)

(10,043)

2,885

Other oils and related products (2)

17,071

5,175

40,566

31,477

Total

$
34,246

$
3,155

$
107,091

$
88,785

Gasoline Distribution and Station Operations Segment:

Sales

Gasoline

$
1,010,655

$
1,110,529

$
2,866,496

$
3,088,906

Station operations (3)

128,942

124,481

354,127

312,455

Total

$
1,139,597

$
1,235,010

$
3,220,623

$
3,401,361

Product margin

Gasoline

$
107,620

$
91,335

$
282,919

$
238,434

Station operations (3)

61,109

57,265

169,621

149,479

Total

$
168,729

$
148,600

$
452,540

$
387,913

Commercial Segment:

Sales

$
313,765

$
344,172

$
1,006,171

$
934,989

Product margin

$
7,213

$
5,478

$
18,217

$
16,524

Combined sales and Product margin:

Sales

$
3,245,653

$
3,468,835

$
9,732,819

$
9,398,301

Product margin (4)

$
210,188

$
157,233

$
577,848

$
493,222

Depreciation allocated to cost of sales

(22,419)

(22,259)

(66,092)

(64,657)

Combined gross profit

$
187,769

$
134,974

$
511,756

$
428,565

(1)

~~(1)~~

Crude oil consists of the Partnership’s crude oil sales and revenue from its logistics activities.

(2)

~~(2)~~

Other oils and related products primarily consist of distillates, residual oil and propane.

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(Unaudited)

(3)

~~(3)~~

Station operations consist of convenience store sales, rental income and sundries.

(4)

~~(4)~~

Product margin is a non-GAAP financial measure used by management and external users of the Partnership’s consolidated financial statements to assess its business. The table above includes a reconciliation of product margin on a combined basis to gross profit, a directly comparable GAAP measure.

Approximately ~~122~~112 million gallons and ~~127~~126 million gallons of the GDSO segment’s sales for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~356~~300 million gallons and ~~347~~256 million gallons of the GDSO segment’s sales for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, were supplied from petroleum products and renewable fuels sourced by the Wholesale segment. The Commercial segment’s sales were predominantly sourced by the Wholesale segment. These intra-segment sales are not reflected as sales in the Wholesale segment as they are eliminated.

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~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

A reconciliation of the totals reported for the reportable segments to the applicable line items in the consolidated financial statements is as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Combined gross profit	$	169,241	$	187,769	$	554,926	$	511,756
Operating costs and expenses not allocated to operating segments:
Selling, general and administrative expenses		43,218		45,333		143,158		127,391
Operating expenses		82,235		87,827		241,502		257,222
Lease exit and termination gain		—		—		—		(493)
Amortization expense		2,712		2,766		8,137		8,719
Net loss (gain) on sale and disposition of assets		691		323		623		(252)
Long-lived asset impairment		203		643		1,927		643
Total operating costs and expenses		129,059		136,892		395,347		393,230
Operating income		40,182		50,877		159,579		118,526
Interest expense		(19,854)		(22,091)		(62,544)		(68,113)
Loss on early extinguishment of debt		—		(13,080)		—		(13,080)
Income tax (expense) benefit		(2,136)		(813)		205		(1,275)
Net income		18,192		14,893		97,240		36,058
Net loss attributable to noncontrolling interest		38		187		528		637
Net income attributable to Global Partners LP	$	18,230	$	15,080	$	97,768	$	36,695

Three Months Ended

Nine Months Ended

September 30,

September 30,


2019

2018

2019

2018

Combined gross profit

$
187,769

$
134,974

$
511,756

$
428,565

Operating costs and expenses not allocated to operating segments:

Selling, general and administrative expenses

45,333

42,127

127,391

121,447

Operating expenses

87,827

83,776

257,222

234,043

Gain on trustee taxes

—

—

—

(52,627)

Lease exit and termination gain

—

(3,506)

(493)

(3,506)

Amortization expense

2,766

3,079

8,719

7,984

Net loss (gain) on sale and disposition of assets

323

940

(252)

5,840

Goodwill and long-lived asset impairment

643

414

643

414

Total operating costs and expenses

136,892

126,830

393,230

313,595

Operating income

50,877

8,144

118,526

114,970

Interest expense

(22,091)

(22,579)

(68,113)

(65,637)

Loss on early extinguishment of debt

(13,080)

—

(13,080)

—

Income tax (expense) benefit

(813)

(29)

(1,275)

900

Net income (loss)

14,893

(14,464)

36,058

50,233

Net loss attributable to noncontrolling interest

187

384

637

1,142

Net income (loss) attributable to Global Partners LP

$
15,080

$
(14,080)

$
36,695

$
51,375

The Partnership’s foreign assets and foreign sales were immaterial as of and for the three and nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

Segment Assets

The Partnership’s terminal assets are allocated to the Wholesale and Commercial segments, and its retail gasoline stations are allocated to the GDSO segment. Due to the commingled nature and uses of the remainder of the Partnership’s assets, it is not reasonably possible for the Partnership to allocate these assets among its reportable segments.

The table below presents total assets by reportable segment at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (in thousands):

Wholesale

Commercial

GDSO

Unallocated

Total
September 30, 2019

$
715,081

$
—

$
1,580,191

$
382,973

$
2,678,245
December 31, 2018

$
615,795

$
—

$
1,415,501

$
392,995

$
2,424,291


		Wholesale		Commercial		GDSO		Unallocated		Total
September 30, 2020	$	605,734	$	—	$	1,547,459	$	333,111	$	2,486,304
December 31, 2019	$	773,696	$	—	$	1,576,655	$	458,076	$	2,808,427

~~The increase in total assets from December 31, 2018 is largely due to the adoption of ASC 842 and the associated recording of right of use assets.~~

~~Note 17. Business Combination~~

~~2018 Acquisition~~

~~Acquisition from Champlain Oil Company, Inc~~.—On July 17, 2018, the Partnership acquired retail fuel and convenience store assets from Champlain Oil Company, Inc. (“Champlain”) in a cash transaction. The acquisition included 37 company-operated gasoline stations with Jiffy Mart-branded convenience stores in Vermont and New

3936

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(Unaudited)

Hampshire and approximately 24 fuel sites that were either owned or leased, including lessee dealer and commission agent locations. The transaction also included fuel supply agreements for approximately 65 gasoline stations, primarily in Vermont and New Hampshire. The stations primarily market major fuel brands such as Mobil, Shell, Citgo, Sunoco and Irving. The purchase price was approximately $138.2 million, including inventory. The acquisition was financed with borrowings under the Partnership’s revolving credit facility.

The acquisition was accounted for using the purchase method of accounting in accordance with the FASB’s guidance regarding business combinations. The Partnership’s financial statements include the results of operations of Champlain subsequent to the acquisition date.

~~The following table presents the final allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):~~

Assets purchased:

Inventory

$
5,450
Prepaid expenses and other current assets

270
Property and equipment

112,871
Intangibles

12,936
Total identifiable assets purchased

131,527
Liabilities assumed:

Accrued expenses and other current liabilities

(131)
Environmental liabilities

(10,757)
Other non-current liabilities

(938)
Total liabilities assumed

(11,826)
Net identifiable assets acquired

119,701
Goodwill

18,478
Net assets acquired

$
138,179

The Partnership’s third-party valuation firm considered the income, market and cost approaches in estimating the fair value of the property and equipment and intangible assets. The market and cost approaches were used to value the property and equipment based on the underlying asset class components of the property and equipment. The income approach was used to value the dealer supply contracts, in-place leases and franchise rights.

The purchase price for the acquisition was allocated to assets acquired and liabilities assumed based on their estimated fair values. The Partnership then allocated the purchase price in excess of net tangible assets acquired to identifiable intangible assets, based on the valuation from the Partnership’s third-party valuation firm. Any excess purchase price over the fair value of the net tangible and intangible assets acquired was allocated to goodwill and assigned to the GDSO reporting unit. The $18.5 million of goodwill was recognized as the transaction expanded the Partnership’s retail portfolio and geographic footprint in New England and provides additional volume to the Partnership’s terminals in New York and Vermont. The goodwill is expected to be tax deductible. The operations of Champlain have been integrated into the GDSO reporting segment.

~~The fair value of $10.7 million assigned to the assumption of environmental liabilities was developed by management based on their estimates, assumptions and acquisition history.~~

~~The fair values of the remaining Champlain assets and liabilities noted above approximate their carrying values as of the acquisition date.~~

The Partnership utilized accounting guidance related to intangible assets which lists the pertinent factors to be considered when estimating the useful life of an intangible asset. These factors include, in part, a review of the expected

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~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

use by the Partnership of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired assets and legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset. The Partnership amortizes these intangible assets over their estimated useful lives which is consistent with the estimated undiscounted future cash flows of these assets.

As part of the purchase price allocation, identifiable intangible assets include dealer supply contracts, in-place leases and franchise rights that are being amortized between one and ten years. Amortization expense related to these intangible assets was $0.5 million and $1.8 million for the three and nine months ended September 30, 2019, respectively.

Note ~~18.~~16. Income Taxes

Section 7704 of the Internal Revenue Code provides that publicly-traded partnerships are, as a general rule, taxed as corporations. However, an exception, referred to as the “Qualifying Income Exception,” exists under Section 7704(c) with respect to publicly-traded partnerships of which 90% or more of the gross income for every taxable year consists of “qualifying income.” Qualifying income includes income and gains derived from the transportation, storage and marketing of refined petroleum products, gasoline blendstocks, crude oil and ethanol to resellers and refiners. Other types of qualifying income include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes qualifying income.

Substantially all of the Partnership’s income is “qualifying income” for federal income tax purposes and, therefore, is not subject to federal income taxes at the partnership level. Accordingly, no provision has been made for income taxes on the qualifying income in the Partnership’s financial statements. Net income for financial statement purposes may differ significantly from taxable income reportable to unitholders as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the Partnership’s agreement of limited partnership. Individual unitholders have different investment basis depending upon the timing and price at which they acquired their common units. Further, each unitholder’s tax accounting, which is partially dependent upon the unitholder’s tax position, differs from the accounting followed in the Partnership’s consolidated financial statements. Accordingly, the aggregate difference in the basis of the Partnership’s net assets for financial and tax reporting purposes cannot be readily determined because information regarding each unitholder’s tax attributes in the Partnership is not available to the Partnership.

~~One~~NaN of the Partnership’s wholly owned subsidiaries, GMG, is a taxable entity for federal and state income tax purposes. Current and deferred income taxes are recognized on the separate earnings of GMG. The after-tax earnings of GMG are included in the earnings of the Partnership. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes for GMG. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Partnership calculates its current and deferred tax provision based on estimates and assumptions that could differ from actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.

The Partnership recognizes deferred tax assets to the extent that the recoverability of these assets satisfies the “more likely than not” criteria in accordance with the FASB’s guidance regarding income taxes. A valuation allowance must be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company’s performance, the

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

market environment in which the company operates, length of carryback and carryforward periods and projections of future operating results. The Partnership concluded, based on an evaluation of future operating results and reversal of existing taxable temporary differences, that a portion of these assets will not be realized in a future period. The valuation allowance ~~increased~~decreased by approximately ~~$0.2~~$0.2 million for the nine months ended September 30, ~~2019.~~2020.

The Partnership computed its tax provision for the three and nine months ended September 30, ~~2019~~2020 based upon the year-to-date effective tax rate as opposed to an estimated annual effective tax rate. Given a reliable estimate of the annual effective tax rate cannot be made, the Partnership concluded that the year-to-date effective tax rate is the most appropriate method to use for the three and nine months ended September 30, ~~2019.~~ 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Unrecognized tax benefits represent uncertain tax positions for which reserves have been established. The Partnership had gross-tax effected unrecognized tax benefits of $0 and $1.0 million at ~~both~~ September 30, ~~2019~~2020 and December 31, ~~2018, of which all would favorably impact the effective tax rate if recognized.~~2019, respectively. The ~~Partnership anticipates that the~~ liability for unrecognized tax benefits for uncertain tax positions ~~could change~~changed by ~~up to $1.0~~$1.0 million infor the ~~next twelve~~nine months ended September 30, 2020 as a result of closure of various statutes of limitations.

GMG files income tax returns in the United States and various state jurisdictions. As of September 30, ~~2019,~~2020, with few exceptions, the Partnership was subject to income tax examination by tax authorities for all years dated back to ~~2015.~~2016.

On March 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 strengthen the 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, the Partnership 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 ended September 30, 2020. The Partnership expects to receive cash refunds totaling $15.8 million associated with the carryback of losses generated in 2018 to the 2016 and 2017 tax years, and this income tax receivable is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet as of September 30, 2020.

Note ~~19.~~17. Changes in Accumulated Other Comprehensive Loss

The following table presents the changes in accumulated other comprehensive loss by component for the periods presented (in thousands):

Pension




Three Months Ended September 30, 2019

Plan

Derivatives

Total
Balance at June 30, 2019

$
(2,778)

$
(2)

$
(2,780)
Other comprehensive income before reclassifications of gain (loss)

315

—

315
Amount of (loss) gain reclassified from accumulated other comprehensive income

76

—

76
Total comprehensive income

391

—

391
Balance at September 30, 2019

$
(2,387)

$
(2)

$
(2,389)


Pension




Nine Months Ended September 30, 2019

Pension Plan

Derivatives

Total
Balance at December 31, 2018

$
(5,258)

$
(2)

$
(5,260)
Other comprehensive income before reclassifications of gain (loss)

2,735

—

2,735
Amount of (loss) gain reclassified from accumulated other comprehensive income

136

—

136
Total comprehensive income

2,871

—

2,871
Balance at September 30, 2019

$
(2,387)

$
(2)

$
(2,389)


	Pension		Derivatives Designated as
Three Months Ended September 30, 2020	Plan		Cash Flow Hedges		Total
Balance at June 30, 2020	$	(5,696)	$	5,187	$	(509)
Other comprehensive income before reclassification of (gain) loss		921		1,485		2,406
Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)		(43)		(957)		(1,000)
Total comprehensive income		878		528		1,406
Balance at September 30, 2020	$	(4,818)	$	5,715	$	897

	Pension		Derivatives Designated as
Nine Months Ended September 30, 2020	Plan		Cash Flow Hedges		Total
Balance at December 31, 2019	$	(5,076)	$	—	$	(5,076)
Other comprehensive income before reclassification of (gain) loss		388		6,906		7,294
Amount of (gain) loss reclassified from accumulated other comprehensive income (loss)		(130)		(1,191)		(1,321)
Total comprehensive income		258		5,715		5,973
Balance at September 30, 2020	$	(4,818)	$	5,715	$	897

Amounts are presented prior to the income tax effect on other comprehensive income. Given the Partnership’s partnership status for federal income tax purposes, the effective tax rate is immaterial.

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(Unaudited)

Note ~~20.~~18. Legal Proceedings

General

Although the Partnership may, from time to time, be involved in litigation and claims arising out of its operations in the normal course of business, the Partnership does not believe that it is a party to any litigation that will have a material adverse impact on its financial condition or results of operations. Except as described below and in Note 1211 included herein, the Partnership is not aware of any significant legal or governmental proceedings against it or contemplated to be brought against it. The Partnership maintains insurance policies with insurers in amounts and with coverage and deductibles as its general partner believes are reasonable and prudent. However, the Partnership can provide no assurance that this insurance will be adequate to protect it from all material expenses related to potential future claims or that these levels of insurance will be available in the future at economically acceptable prices.

Other

In October 2020, the Partnership was served with a complaint filed against the Partnership and its wholly owned subsidiary, Global Companies LLC (“Global Companies”) alleging, among other things, wrongful death and loss of consortium. The complaint, filed in the Middlesex County Superior Court of the Commonwealth of Massachusetts, alleges, among other things, that a truck driver (whose estate is a co-plaintiff), while loading gasoline and diesel fuel at terminals owned and operated by the Partnership located in Albany, New York and Burlington, Vermont, was exposed to benzene-containing products and/or vapors therefrom. The Partnership and Global Companies have meritorious defenses to the allegations in the complaint and will vigorously contest the actions taken by the plaintiffs.

On June 1, 2020, Basin Transload filed for reorganization in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) under Chapter 11 of the United States Bankruptcy Code. Pursuant to the terms of a settlement agreement entered into as of August 12, 2020 by and among the Partnership, Global Operating LLC (“Global Operating”), Basin Transload and the minority members of Basin Transload (the “Basin Settlement Agreement”), Basin Transload filed a motion with the Bankruptcy Court to voluntarily dismiss the bankruptcy petition. On September 14, 2020, the Bankruptcy Court issued an order approving the Basin Settlement Agreement and dismissing the bankruptcy petition. The order became final and non-appealable on September 28, 2020. In connection with the Basin Settlement Agreement, Global Operating acquired the minority members’ collective 40% membership interest in Basin Transload, the arbitration petition previously filed by the minority members against the Partnership and Global Operating was withdrawn with prejudice and each of the actions filed in the state courts of Massachusetts and North Dakota by the Partnership and the minority members, respectively, were voluntarily dismissed with prejudice.

During the second quarter ended June 30, 2016, the Partnership determined that gasoline loaded from certain loading bays at ~~one~~1 of its terminals did not contain the necessary additives as a result of an IT-related configuration error. The error was corrected, and all gasoline being sold at the terminal now contains the appropriate additives. Based upon current information, the Partnership believes approximately 14 million gallons of gasoline were impacted. The Partnership has notified the EPA of this error. As a result of this error, the Partnership could be subject to fines, penalties and other related claims, including customer claims.

On August 2, 2016, the Partnership received a Notice of Violation (“NOV”) from the EPA, alleging that permits for the Partnership’s petroleum product transloading facility in Albany, New York (the “Albany Terminal”), issued by the New York State Department of Environmental Conservation (“NYSDEC”) between August 9, 2011 and November 7, 2012, violated the Clean Air Act (the “CAA”) and the federally enforceable New York State Implementation Plan (“SIP”) by increasing throughput of crude oil at the Albany Terminal without complying with the New Source Review (“NSR”) requirements of the SIP. The Partnership denied the allegations and the NYSDEC did not issue any such NOV. The Albany Terminal is a 63-acre licensed, permitted and operational stationary bulk petroleum storage and transfer terminal that currently consists of petroleum product storage tanks, along with truck, rail and marine

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

loading facilities, for the storage, blending and distribution of various petroleum and related products, including gasoline, ethanol, distillates, heating and crude oils. The applicable permits issued by the NYSDEC to the Partnership in 2011 and 2012 specifically ~~authorize~~authorized the Partnership to increase the throughput of crude oil at the Albany Terminal. According to the allegations in the NOV, the NYSDEC permit actions should have been treated as a major modification under the NSR program, requiring additional emission control measures and compliance with other NSR requirements. The NYSDEC has not alleged that the Partnership’s permits were subject to the NSR program and the NYSDEC never issued an NOV in the matter. The CAA authorizes the EPA to take enforcement action ~~in response to~~if there are violations of the New York SIP seeking compliance and penalties. The Partnership ~~believes~~has denied the NOV allegations and asserts that the permits issued by the NYSDEC comply with the CAA and applicable state air permitting requirements and that no material violation of law ~~has~~ occurred. The Partnership disputed the claims alleged in the NOV and first responded to the EPA in September 2016. The Partnership met with the EPA and provided additional information at the agency’s request. On December 16, 2016, the EPA proposed a Settlement Agreement in a letter to the Partnership relating to the allegations in the NOV. On January 17, 2017, the Partnership responded to the EPA indicating that the EPA had failed to explain or provide support for its allegations and that the EPA needed to better explain its positions and the evidence on which it was relying. The EPA did not respond with such evidence, but instead has requested that the Partnership enter into a series of tolling agreements. The Partnership ~~has~~ signed the tolling agreements with respect to this matter, as requested by the EPA, and such agreements currently extend through ~~June 30,~~December 31, 2020. To date, the EPA has not taken any further formal action with respect to the NOV.

By letter dated January 25, 2017, the Partnership received a notice of intent to sue (the “2017 NOI”) from Earthjustice related to alleged violations of the CAA; specifically alleging that the Partnership was operating the Albany

~~Table of Contents~~

~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

Terminal without a valid CAA Title V Permit. On February 9, 2017, the Partnership responded to Earthjustice advising that the 2017 NOI was without factual or legal merit and that the Partnership would move to dismiss any action commenced by Earthjustice. No action was taken by either the EPA or the NYSDEC with regard to the Earthjustice allegations. At this time, there has been no further action taken by Earthjustice. Neither the EPA nor the NYSDEC has followed up on the 2017 NOI. The Albany Terminal is currently operating pursuant to its Title V Permit, which has been extended in accordance with the State Administrative Procedures Act. Additionally, the Partnership has submitted a Title V Permit renewal and a request for modifications to its existing Title V Permit. The Partnership believes that it has meritorious defenses against all allegations.

On March 26, 2015, the Partnership received a Notice of Non-Compliance (“NON”) from the Massachusetts Department of Environmental Protection (“DEP”) with respect to the Revere terminal (the “Revere Terminal”) located in Boston Harbor in Revere, Massachusetts, alleging certain violations of the National Pollutant Discharge Elimination System Permit (“NPDES Permit”) related to storm water discharges. The NON required the Partnership to submit a plan to remedy the reported violations of the NPDES Permit. The Partnership has responded to the NON with a plan and has implemented modifications to the storm water management system at the Revere Terminal in accordance with the plan. The Partnership has requested that the DEP acknowledge completion of the required modifications to the storm water management system in satisfaction of the NON. While no response has yet been received, the Partnership believes that compliance with the NON has been achieved, and implementation of the plan will have no material impact on its operations.

The Partnership received letters from the EPA dated November 2, 2011 and March 29, 2012, containing requirements and testing orders (collectively, the “Requests for Information”) for information under the CAA. The Requests for Information were part of an EPA investigation to determine whether the Partnership has violated sections of the CAA at certain of its terminal locations in New England with respect to residual oil and asphalt. On June 6, 2014, a NOV was received from the EPA, alleging certain violations of its Air Emissions License issued by the Maine Department of Environmental Protection, based upon the test results at the South Portland, Maine terminal. The Partnership met with and provided additional information to the EPA with respect to the alleged violations. On April 7, 2015, the EPA issued a Supplemental Notice of Violation modifying the allegations of violations of the terminal’s Air Emissions License. The Partnership has entered into a consent decree (the “Consent Decree”) with the EPA and the

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(Unaudited)

United States Department of Justice (the “Department of Justice”), which was filed in the U.S. District Court for the District of Maine (the “Court”) on March 25, 2019. ~~On October 15, 2019,~~The Consent Decree was entered by the ~~Department of Justice filed a Motion to Enter~~Court on December 19, 2019. The Partnership believes that compliance with the Consent Decree ~~with~~and implementation of the ~~Court. Final approval~~requirements of the Consent Decree ~~by the Court is currently pending.~~will have no material impact on its operations.

Note ~~21.~~19. New Accounting Standards

There have been no developments to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Partnership’s consolidated financial statements, from those disclosed in the Partnership’s ~~2018~~2019 Annual Report on Form 10-K, except for the following:

Accounting Standards or Updates Recently Adopted

In August ~~2017,~~2018, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ASU ~~2017-12, “Derivatives~~2018-15, Intangibles – Goodwill and ~~Hedging: Targeted Improvements to~~Other – Internal-Use Software: Customer’s Accounting for ~~Hedging Activities.”~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard ~~expands and refines hedge accounting for both financial and non-financial risk components,~~ aligns the ~~recognition and presentation of~~requirements for capitalizing implementation costs in a cloud computing arrangement with the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. requirements for capitalizing implementation costs incurred for an internal-use software license. The Partnership adopted this standard on January 1, ~~2019~~2020 with no material impact on the Partnership’s consolidated financial statements.

In ~~February 2016,~~August 2018, the FASB issued ASU ~~2016-02, “Leases,~~2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement,” which amends existing guidance on disclosure requirements for fair value measurements. This standard requires prospective application on changes in unrealized gains and ~~has modified~~losses, the ~~standard thereafter through a series~~range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty. The effects of other amendments ~~now codified as ASC 842. ASC 842 amends the existing accounting standards for lease accounting, including requiring lessees~~must be applied retrospectively to ~~recognize most leases on their balance sheets and making targeted changes to~~

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~~(Unaudited)~~

~~lessor accounting, however lessor accounting under the new standard is substantially unchanged.~~all periods presented. The Partnership adopted this standard on January 1, ~~2019 using a prospective transition approach, which applies~~2020 with no material impact on the provisions of the new guidance at the effective date without adjusting the comparative periods presented. The Partnership has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Partnership to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. The Partnership made an accounting policy election to keep leases with an initial term of 12 months or less off of thePartnership’s consolidated balance sheet. The Partnership has conducted analyses, conducted detailed contract reviews, considered expanded disclosure requirements, assessed internal control impacts and implemented a new lease accounting system as part of evaluating the impacts of ASU 2016-02 and adopting the accounting guidance. See Note 2 for additional information.financial statements.

~~Accounting Standards or Updates Not Yet Effective~~

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial ~~Instruments.~~Instruments,” ~~This~~and has modified the standard thereafter, now codified as ASC 326. ASC 326 requires that for most financial assets, losses be based on an expected loss approach, which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. ~~Expanded disclosures~~The Partnership adopted this standard on January 1, 2020 using the modified retrospective transition method. The adoption of this standard did not materially impact the measurement of the Partnership’s credit loss recognition and, therefore, did not have a material impact on the recognition of expected credit losses on the Partnership’s consolidated financial statements.

The Partnership is exposed to credit losses primarily through its sales of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. Concentration of credit risk with respect to trade receivables are limited due to the Partnership’s customer base being large and diverse. The Partnership assesses each counterparty’s ability to pay for the products the Partnership sells by conducting a credit review. This credit review considers the Partnership’s expected billing exposure and timing for payment and the counterparty’s established credit rating or, in the case when a credit rating is not available, the Partnership’s assessment of the counterparty’s creditworthiness based on the Partnership’s analysis of the counterparty’s financial statements. The Partnership also considers contract terms and conditions and business strategy in its evaluation. A credit limit is established for each counterparty based on the outcome of this review. The Partnership may require collateralized asset support in the form of standby letters of credit, personal or corporate guarantees and/or a prepayment to mitigate credit risk.

The Partnership monitors its ongoing credit exposure through active reviews of counterparty balances against contract terms and due dates. The Partnership’s historical experience of collecting receivables, supported by the level of default, is that credit risk is low across classes of customers and locations and trade receivables are considered to be a single class of financial assets. Impairment for trade receivables are calculated for specific receivables with known or

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(Unaudited)

anticipated issues affecting the likelihood of collectability and for balances past due with a probability of default based on historical data as well as relevant forward-looking information. The Partnership’s activities include timely account reconciliations, dispute resolutions and payment confirmations. The Partnership utilizes internal legal counsel or collection agencies and outside legal counsel to pursue recovery of defaulted receivables.

Based on an aging analysis at September 30, 2020, approximately 98% of the Partnership’s accounts receivable were outstanding less than 30 days.

The following table presents changes in the credit loss allowance included in accounts receivable, net in the accompanying balance sheet (in thousands):


	Credit Loss
	Allowance
Balance at December 31, 2019	$	2,729
Current period provision		375
Write-offs charged against allowance for credit losses		(63)
Recoveries collected		165
Balance at September 30, 2020	$	3,206

Accounting Standards or Updates Not Yet Effective

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740 related to the ~~methods used to estimate~~approach for intra-period tax allocation, the ~~losses as well as a specific disaggregation~~methodology for calculating income taxes in an interim period and the recognition of ~~balances~~deferred tax liabilities for ~~financial assets are also required.~~outside basis differences. This standard is effective for ~~annual periods~~fiscal years beginning after December 15, ~~2019~~2020 and interim periods within those ~~annual periods,~~fiscal years, with early adoption ~~permitted for annual periods beginning after December 15, 2018.~~permitted. The Partnership ~~is assessing~~does not expect the ~~impact~~adoption of this standard ~~will~~to have a material impact on its consolidated financial statements.

Note ~~22.~~20. Subsequent Events

Distribution to Common Unitholders—On October ~~25, 2019,~~26, 2020, the board of directors of the General Partner declared a quarterly cash distribution of ~~$0.52~~$0.50 per unit ($~~2.08~~2.00 per unit on an annualized basis) for the period from July 1, ~~2019~~2020 through September 30, ~~2019.~~2020. On November ~~14, 2019,~~13, 2020, the Partnership will pay this cash distribution to its common unitholders of record as of the close of business on November ~~8, 2019.~~ 9, 2020.

Distribution to Preferred Unitholders—On October ~~22, 2019,~~19, 2020, the board of directors of the 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, covering the period from August 15, ~~2019~~2020 through November 14, ~~2019.~~2020. This distribution will be payable on November ~~15, 2019~~16, 2020 to holders of record as of the opening of business on November ~~1, 2019.~~2, 2020.

2029 Notes Offering and 2023 Notes Redemption— On October 7, 2020, the Issuers completed a private offering of $350.0 million aggregate principal amount of 6.875% senior notes due 2029. The Partnership used the net proceeds from the offering to fund the redemption of the 2023 Notes and to repay a portion of the borrowings outstanding under its credit agreement. See Note 8, “Debt and Financing Obligations—Senior Notes” for additional information on the 2029 Notes.

The Partnership expects the redemption of the 2023 Notes will result in a loss of approximately $7.2 million from the early extinguishment of debt in the fourth quarter of 2020 associated with the call premium paid as well as the write-off of remaining unamortized deferred financing fees.

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(Unaudited)

Note ~~23.~~21. Supplemental Guarantor Condensed Consolidating Financial Statements

The Partnership’s wholly owned subsidiaries, other than GLP Finance, are guarantors of senior notes issued by the Partnership and GLP Finance. As such, the Partnership is subject to the requirements of Rule 3-10 of Regulation S-X of the SEC regarding financial statements of guarantors and issuers of registered guaranteed securities. The Partnership presents condensed consolidating financial information for its subsidiaries within the notes to consolidated financial statements in accordance with the criteria established for parent companies in the SEC’s Regulation S-X, Rule 3-10(d).

The following condensed consolidating financial information presents the Condensed Consolidating Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Condensed Consolidating Statements of Operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 and the Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 of the Partnership’s 100% owned guarantor subsidiaries, the non-guarantor subsidiary and the eliminations necessary to arrive at the information for the Partnership on a consolidated basis. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.

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(Unaudited)

Condensed Consolidating Balance Sheet

September 30, ~~2019~~2020

(In thousands)


	(Issuer)			Non-
	Guarantor			Guarantor
	Subsidiaries			Subsidiary		Eliminations		Consolidated

										(Issuer)		Non-
										Guarantor		Guarantor
										Subsidiaries		Subsidiary		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	5,197		$	583	$	—	$	5,780	$	3,581	$	1,280	$	—	$	4,861
Accounts receivable, net		335,640			112		—		335,752		239,167		229		—		239,396
Accounts receivable - affiliates		7,432			—		—		7,432
Accounts receivable—affiliates											5,282		—		—		5,282
Inventories		393,695			—		—		393,695		328,706		—		—		328,706
Brokerage margin deposits		24,716			—		—		24,716		23,455		—		—		23,455
Derivative assets		9,198			—		—		9,198		43,159		—		—		43,159
Prepaid expenses and other current assets		94,650			159		—		94,809		92,126		169		—		92,295
Total current assets		870,528			854		—		871,382		735,476		1,678		—		737,154
Property and equipment, net		1,099,108			2,500		—		1,101,608		1,068,623		1,628		—		1,070,251
Right of use assets, net		298,922			78		—		299,000		287,727		60		—		287,787
Intangible assets, net		49,477			—		—		49,477		38,627		—		—		38,627
Goodwill		324,744	��		—		—		324,744		323,889		—		—		323,889
Other assets		32,034			—		—		32,034		28,596		—		—		28,596
Total assets	$	2,674,813		$	3,432	$	—	$	2,678,245	$	2,482,938	$	3,366	$	—	$	2,486,304


Liabilities and partners’ equity
Current liabilities:
Accounts payable	$	310,314		$	54	$	—	$	310,368	$	186,768	$	26	$	—	$	186,794
Accounts payable - affiliates		(42)			42		—		—
Working capital revolving credit facility - current portion		102,900			—		—		102,900
Accounts payable—affiliates											(396)		396		—		—
Working capital revolving credit facility—current portion											10,100		—		—		10,100
Lease liability—current portion		65,273			—		—		65,273		70,965		—		—		70,965
Environmental liabilities - current portion		6,092			—		—		6,092
Environmental liabilities—current portion											5,009		—		—		5,009
Trustee taxes payable		35,637			—		—		35,637		30,077		—		—		30,077
Accrued expenses and other current liabilities		92,252			138		—		92,390		99,683		215		—		99,898
Derivative liabilities		7,908			—		—		7,908		6,589		—		—		6,589
Total current liabilities		620,334			234		—		620,568		408,795		637		—		409,432
Working capital revolving credit facility - less current portion		150,000			—		—		150,000
Working capital revolving credit facility—less current portion											150,000		—		—		150,000
Revolving credit facility		197,000			—		—		197,000		188,000		—		—		188,000
Senior notes		690,103			—		—		690,103		691,765		—		—		691,765
Long-term lease liability—less current portion		243,596			58		—		243,654		229,266		41		—		229,307
Environmental liabilities - less current portion		54,512			—		—		54,512
Environmental liabilities—less current portion											50,416		—		—		50,416
Financing obligations		149,526			—		—		149,526		146,994		—		—		146,994
Deferred tax liabilities		43,243			—		—		43,243		56,399		—		—		56,399
Other long-term liabilities		47,892			—		—		47,892
Other long—term liabilities											54,926		—		—		54,926
Total liabilities		2,196,206			292		—		2,196,498		1,976,561		678		—		1,977,239


Partners' equity
Global Partners LP equity		478,607			1,914		—		480,521		506,377		2,688		—		509,065
Noncontrolling interest		—			1,226		—		1,226		—		—		—		—
Total partners' equity		478,607			3,140		—		481,747		506,377		2,688		—		509,065
Total liabilities and partners' equity	$	2,674,813		$	3,432	$	—	$	2,678,245	$	2,482,938	$	3,366	$	—	$	2,486,304

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Balance Sheet

December 31, ~~2018~~2019

(In thousands)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Eliminations		Consolidated

									(Issuer)		Non-
									Guarantor		Guarantor
									Subsidiaries		Subsidiary		Eliminations		Consolidated
Assets
Current assets:
Cash and cash equivalents	$	7,050	$	1,071	$	—	$	8,121	$	11,591	$	451	$	—	$	12,042
Accounts receivable, net		334,689		52		36		334,777		412,853		339		3		413,195
Accounts receivable - affiliates		5,435		36		(36)		5,435
Accounts receivable—affiliates										7,823		3		(3)		7,823
Inventories		386,442		—		—		386,442		450,482		—		—		450,482
Brokerage margin deposits		14,766		—		—		14,766		34,466		—		—		34,466
Derivative assets		26,390		—		—		26,390		4,564		—		—		4,564
Prepaid expenses and other current assets		98,877		100		—		98,977		81,845		95		—		81,940
Total current assets		873,649		1,259		—		874,908		1,003,624		888		—		1,004,512
Property and equipment, net		1,128,826		3,806		—		1,132,632		1,102,644		2,219		—		1,104,863
Right of use assets, net										296,672		74		—		296,746
Intangible assets, net		58,532		—		—		58,532		46,765		—		—		46,765
Goodwill		327,406		—		—		327,406		324,474		—		—		324,474
Other assets		30,813		—		—		30,813		31,067		—		—		31,067
Total assets	$	2,419,226	$	5,065	$	—	$	2,424,291	$	2,805,246	$	3,181	$	—	$	2,808,427


Liabilities and partners' equity
Current liabilities:
Accounts payable	$	308,941	$	38	$	—	$	308,979	$	373,355	$	31	$	—	$	373,386
Accounts payable - affiliates		(169)		169		—		—
Working capital revolving credit facility - current portion		103,300		—		—		103,300
Environmental liabilities - current portion		6,092		—		—		6,092
Accounts payable—affiliates										(17)		17		—		—
Working capital revolving credit facility—current portion										148,900		—		—		148,900
Lease liability—current portion										68,143		17		—		68,160
Environmental liabilities—current portion										5,009		—		—		5,009
Trustee taxes payable		42,613		—		—		42,613		42,932		—		—		42,932
Accrued expenses and other current liabilities		117,149		125		—		117,274		102,737		65		—		102,802
Derivative liabilities		4,494		—		—		4,494		12,698		—		—		12,698
Total current liabilities		582,420		332		—		582,752		753,757		130		—		753,887
Working capital revolving credit facility - less current portion		150,000		—		—		150,000
Working capital revolving credit facility—less current portion										175,000		—		—		175,000
Revolving credit facility		220,000		—		—		220,000		192,700		—		—		192,700
Senior notes		664,455		—		—		664,455		690,533		—		—		690,533
Environmental liabilities - less current portion		57,132		—		—		57,132
Long-term lease liability—less current portion										239,308		41		—		239,349
Environmental liabilities—less current portion										54,262		—		—		54,262
Financing obligations		149,997		—		—		149,997		148,127		—		—		148,127
Deferred tax liabilities		42,856		—		—		42,856		42,879		—		—		42,879
Other long-term liabilities		57,905		—		—		57,905
Other long—term liabilities										52,451		—		—		52,451
Total liabilities		1,924,765		332		—		1,925,097		2,349,017		171		—		2,349,188


Partners' equity
Global Partners LP equity		494,461		2,870		—		497,331		456,229		1,836		—		458,065
Noncontrolling interest		—		1,863		—		1,863		—		1,174		—		1,174
Total partners' equity		494,461		4,733		—		499,194		456,229		3,010		—		459,239
Total liabilities and partners' equity	$	2,419,226	$	5,065	$	—	$	2,424,291	$	2,805,246	$	3,181	$	—	$	2,808,427

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2020

(In thousands)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Eliminations		Consolidated
Sales	$	2,061,152	$	718	$	(488)	$	2,061,382
Cost of sales		1,892,535		94		(488)		1,892,141
Gross profit		168,617		624		—		169,241
Costs and operating expenses:
Selling, general and administrative expenses		42,865		353		—		43,218
Operating expenses		81,869		366		—		82,235
Amortization expense		2,712		—		—		2,712
Net loss on sale and disposition of assets		691		—		—		691
Long-lived asset impairment		203		—		—		203
Total costs and operating expenses		128,340		719		—		129,059
Operating income (loss)		40,277		(95)		—		40,182
Interest expense		(19,854)		—		—		(19,854)
Income (loss) before income tax expense		20,423		(95)		—		20,328
Income tax expense		(2,136)		—		—		(2,136)
Net income (loss)		18,287		(95)		—		18,192
Net loss attributable to noncontrolling interest		—		38		—		38
Net income attributable to Global Partners LP		18,287		(57)		—		18,230
Less: General partners' interest in net income, including incentive distribution rights		324		—		—		324
Less: Series A preferred limited partner interest in net income		1,682		—		—		1,682
Net income attributable to common limited partners	$	16,281	$	(57)	$	—	$	16,224

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

Three Months Ended September 30, 2019

(In thousands)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Eliminations		Consolidated

									(Issuer)		Non-
									Guarantor		Guarantor
									Subsidiaries		Subsidiary		Eliminations		Consolidated
Sales	$	3,245,348	$	313	$	(8)	$	3,245,653	$	3,245,348	$	313	$	(8)	$	3,245,653
Cost of sales		3,057,568		324		(8)		3,057,884		3,057,568		324		(8)		3,057,884
Gross profit (loss)		187,780		(11)		—		187,769		187,780		(11)		—		187,769
Costs and operating expenses:
Selling, general and administrative expenses		45,237		96		—		45,333		45,237		96		—		45,333
Operating expenses		87,465		362		—		87,827		87,465		362		—		87,827
Amortization expense		2,766		—		—		2,766		2,766		—		—		2,766
Net loss on sale and disposition of assets		323		—		—		323		323		—		—		323
Goodwill and long-lived asset impairment		643		—		—		643
Long-lived asset impairment										643		—		—		643
Total costs and operating expenses		136,434		458		—		136,892		136,434		458		—		136,892
Operating income (loss)		51,346		(469)		—		50,877		51,346		(469)		—		50,877
Interest expense		(22,091)		—		—		(22,091)		(22,091)		—		—		(22,091)
Loss on early extinguishment of debt		(13,080)		—		—		(13,080)		(13,080)		—		—		(13,080)
Income (loss) before income tax expense		16,175		(469)		—		15,706		16,175		(469)		—		15,706
Income tax expense		(813)		—		—		(813)		(813)		—		—		(813)
Net income (loss)		15,362		(469)		—		14,893		15,362		(469)		—		14,893
Net loss attributable to noncontrolling interest		—		187		—		187		—		187		—		187
Net income (loss) attributable to Global Partners LP		15,362		(282)		—		15,080
Net income attributable to Global Partners LP										15,362		(282)		—		15,080
Less: General partners' interest in net income, including incentive distribution rights		395		—		—		395		395		—		—		395
Less: Series A preferred limited partner interest in net income		1,682		—		—		1,682		1,682		—		—		1,682
Net income attributable to common limited partners	$	13,285	$	(282)	$	—	$	13,003	$	13,285	$	(282)	$	—	$	13,003

4847

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

~~Three~~Nine Months Ended September 30, ~~2018~~2020

(In thousands)

(Issuer)

Non-

Guarantor

Guarantor

Subsidiaries

Subsidiary

Eliminations

Consolidated

Sales

$
3,468,748

$
230

$
(143)

$
3,468,835

Cost of sales

3,333,316

688

(143)

3,333,861

Gross profit (loss)

135,432

(458)

—

134,974

Costs and operating expenses:

Selling, general and administrative expenses

42,026

101

—

42,127

Operating expenses

83,376

400

—

83,776

Lease exit and termination gain

(3,506)

—

—

(3,506)

Amortization expense

3,079

—

—

3,079

Net loss on sale and disposition of assets

940

—

—

940

Goodwill and long-lived asset impairment

414

—

—

414

Total costs and operating expenses

126,329

501

—

126,830

Operating income (loss)

9,103

(959)

—

8,144

Interest expense

(22,579)

—

—

(22,579)

Loss before income tax expense

(13,476)

(959)

—

(14,435)

Income tax expense

(29)

—

—

(29)

Net loss

(13,505)

(959)

—

(14,464)

Net loss attributable to noncontrolling interest

—

384

—

384

Net loss attributable to Global Partners LP

(13,505)

(575)

—

(14,080)

Less: General partners' interest in net loss, including incentive distribution rights

(27)

—

—

(27)

Less: Series A preferred limited partner interest in net income

1,009

—

—

1,009

Net loss attributable to common limited partners

$
(14,487)

$
(575)

$
—

$
(15,062)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Eliminations		Consolidated
Sales	$	6,124,977	$	1,829	$	(754)	$	6,126,052
Cost of sales		5,571,224		656		(754)		5,571,126
Gross profit		553,753		1,173		—		554,926
Costs and operating expenses:
Selling, general and administrative expenses		141,871		1,287		—		143,158
Operating expenses		240,295		1,207		—		241,502
Amortization expense		8,137		—		—		8,137
Net loss on sale and disposition of assets		623		—		—		623
Long-lived asset impairment		1,927		—		—		1,927
Total costs and operating expenses		392,853		2,494		—		395,347
Operating income		160,900		(1,321)		—		159,579
Interest expense		(62,544)		—		—		(62,544)
Income (loss) before income tax benefit		98,356		(1,321)		—		97,035
Income tax benefit		205		—		—		205
Net income (loss)		98,561		(1,321)		—		97,240
Net loss attributable to noncontrolling interest		—		528		—		528
Net income attributable to Global Partners LP		98,561		(793)		—		97,768
Less: General partners' interest in net income, including incentive distribution rights		857		—		—		857
Less: Series A preferred limited partner interest in net income		5,046		—		—		5,046
Net income attributable to common limited partners	$	92,658	$	(793)	$	—	$	91,865

4948

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement of Operations

Nine Months Ended September 30, 2019

(In thousands)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Eliminations		Consolidated

									(Issuer)		Non-
									Guarantor		Guarantor
									Subsidiaries		Subsidiary		Eliminations		Consolidated
Sales	$	9,731,847	$	1,205	$	(233)	$	9,732,819	$	9,731,847	$	1,205	$	(233)	$	9,732,819
Cost of sales		9,219,952		1,344		(233)		9,221,063		9,219,952		1,344		(233)		9,221,063
Gross profit (loss)		511,895		(139)		—		511,756		511,895		(139)		—		511,756
Costs and operating expenses:
Selling, general and administrative expenses		127,096		295		—		127,391		127,096		295		—		127,391
Operating expenses		256,062		1,160		—		257,222		256,062		1,160		—		257,222
Lease exit and termination gain		(493)		—		—		(493)		(493)		—		—		(493)
Amortization expense		8,719		—		—		8,719		8,719		—		—		8,719
Net gain on sale and disposition of assets		(252)		—		—		(252)		(252)		—		—		(252)
Goodwill and long-lived asset impairment		643		—		—		643
Long-lived asset impairment										643		—		—		643
Total costs and operating expenses		391,775		1,455		—		393,230		391,775		1,455		—		393,230
Operating income (loss)		120,120		(1,594)		—		118,526		120,120		(1,594)		—		118,526
Interest expense		(68,113)		—		—		(68,113)		(68,113)		—		—		(68,113)
Loss on early extinguishment of debt		(13,080)		—		—		(13,080)		(13,080)		—		—		(13,080)
Income (loss) before income tax expense		38,927		(1,594)		—		37,333		38,927		(1,594)		—		37,333
Income tax expense		(1,275)		—		—		(1,275)		(1,275)		—		—		(1,275)
Net income (loss)		37,652		(1,594)		—		36,058		37,652		(1,594)		—		36,058
Net loss attributable to noncontrolling interest		—		637		—		637		—		637		—		637
Net income (loss) attributable to Global Partners LP		37,652		(957)		—		36,695
Net income attributable to Global Partners LP										37,652		(957)		—		36,695
Less: General partners' interest in net income, including incentive distribution rights		1,065		—		—		1,065		1,065		—		—		1,065
Less: Series A preferred limited partner interest in net income		5,046		—		—		5,046		5,046		—		—		5,046
Net income attributable to common limited partners	$	31,541	$	(957)	$	—	$	30,584	$	31,541	$	(957)	$	—	$	30,584

5049

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement ~~of Operations~~Cash Flows

Nine Months Ended September 30, ~~2018~~2020

(In thousands)

(Issuer)

Non-

Guarantor

Guarantor

Subsidiaries

Subsidiary

Eliminations

Consolidated

Sales

$
9,397,696

$
923

$
(318)

$
9,398,301

Cost of sales

8,967,733

2,321

(318)

8,969,736

Gross profit (loss)

429,963

(1,398)

—

428,565

Costs and operating expenses:

Selling, general and administrative expenses

121,154

293

—

121,447

Operating expenses

232,880

1,163

—

234,043

Gain on trustee taxes

(52,627)

—

—

(52,627)

Lease exit and termination gain

(3,506)

—

—

(3,506)

Amortization expense

7,984

—

—

7,984

Net loss on sale and disposition of assets

5,840

—

—

5,840

Goodwill and long-lived asset impairment

414

—

—

414

Total costs and operating expenses

312,139

1,456

—

313,595

Operating income (loss)

117,824

(2,854)

—

114,970

Interest expense

(65,637)

—

—

(65,637)

Income (loss) before income tax benefit

52,187

(2,854)

—

49,333

Income tax benefit

900

—

—

900

Net income (loss)

53,087

(2,854)

—

50,233

Net loss attributable to noncontrolling interest

—

1,142

—

1,142

Net income (loss) attributable to Global Partners LP

53,087

(1,712)

—

51,375

Less: General partners' interest in net income, including incentive distribution rights

479

—

—

479

Less: Series A preferred limited partner interest in net income

1,009

—

—

1,009

Net income attributable to common limited partners

$
51,599

$
(1,712)

$
—

$
49,887


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Consolidated
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	250,460	$	(171)	$	250,289

Cash flows from investing activities
Capital expenditures		(39,644)		—		(39,644)
Seller note issuances		(1,188)		—		(1,188)
Proceeds from sale of property and equipment		6,060		—		6,060
Net cash used in investing activities		(34,772)		—		(34,772)

Cash flows from financing activities
Net payments on working capital revolving credit facility		(163,800)		—		(163,800)
Net payments on revolving credit facility		(4,700)		—		(4,700)
Repurchase of common units		(291)		—		(291)
LTIP units withheld for tax obligations		(273)		—		(273)
Noncontrolling interest capital contribution		(600)		1,000		400
Acquisition of noncontrolling interest		(1,650)		—		(1,650)
Distributions to limited partners and general partner		(52,384)		—		(52,384)
Net cash used in (provided by) financing activities		(223,698)		1,000		(222,698)

Cash and cash equivalents
(Decrease) increase in cash and cash equivalents		(8,010)		829		(7,181)
Cash and cash equivalents at beginning of period		11,591		451		12,042
Cash and cash equivalents at end of period	$	3,581	$	1,280	$	4,861

5150

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Condensed Consolidating Statement Cash Flows

Nine Months Ended September 30, 2019

(In thousands)


	(Issuer)		Non-
	Guarantor		Guarantor
	Subsidiaries		Subsidiary		Consolidated

							(Issuer)		Non-
							Guarantor		Guarantor
							Subsidiaries		Subsidiary		Consolidated
Cash flows from operating activities
Net cash provided by (used in) operating activities	$	110,013	$	(488)	$	109,525	$	110,013	$	(488)	$	109,525


Cash flows from investing activities
Capital expenditures		(52,494)		—		(52,494)		(52,494)		—		(52,494)
Seller note issuances		(640)		—		(640)		(640)		—		(640)
Proceeds from sale of property and equipment		11,994		—		11,994		11,994		—		11,994
Net cash used in investing activities		(41,140)		—		(41,140)		(41,140)		—		(41,140)


Cash flows from financing activities
Net payments on working capital revolving credit facility		(400)		—		(400)		(400)		—		(400)
Net payments on revolving credit facility		(23,000)		—		(23,000)		(23,000)		—		(23,000)
Proceeds from senior notes, net		392,602		—		392,602		392,602		—		392,602
Repayment of senior notes		(381,886)		—		(381,886)		(381,886)		—		(381,886)
LTIP units withheld for tax obligations		(646)		—		(646)		(646)		—		(646)
Distributions to limited partners and general partner		(57,396)		—		(57,396)		(57,396)		—		(57,396)
Net cash used in financing activities		(70,726)		—		(70,726)		(70,726)		—		(70,726)


Cash and cash equivalents
Decrease in cash and cash equivalents		(1,853)		(488)		(2,341)		(1,853)		(488)		(2,341)
Cash and cash equivalents at beginning of period		7,050		1,071		8,121		7,050		1,071		8,121
Cash and cash equivalents at end of period	$	5,197	$	583	$	5,780	$	5,197	$	583	$	5,780

5251

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~~GLOBAL PARTNERS LP~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Condensed Consolidating Statement Cash Flows~~

~~Nine Months Ended September 30, 2018~~

~~(In thousands)~~

(Issuer)

Non-

Guarantor

Guarantor


Subsidiaries

Subsidiary

Consolidated

Cash flows from operating activities

Net cash used in operating activities

$
(45,249)

$
(653)

$
(45,902)

Cash flows from investing activities

Acquisitions

(171,824)

—

(171,824)

Capital expenditures

(43,461)

—

(43,461)

Seller note issuances

(3,062)

—

(3,062)

Proceeds from sale of property and equipment

14,930

—

14,930

Net cash used in investing activities

(203,417)

—

(203,417)

Cash flows from financing activities

Net proceeds from issuance of Series A preferred units

66,366

—

66,366

Net borrowings from working capital revolving credit facility

181,000

—

181,000

Net borrowings from revolving credit facility

48,200

—

48,200

LTIP units withheld for tax obligations

(806)

—

(806)

Distributions to limited partners and general partner

(47,848)

—

(47,848)

Net cash provided by financing activities

246,912

—

246,912

Cash and cash equivalents

Decrease in cash and cash equivalents

(1,754)

(653)

(2,407)

Cash and cash equivalents at beginning of period

13,035

1,823

14,858

Cash and cash equivalents at end of period

$
11,281

$
1,170

$
12,451

~~Table of Contents~~

Item ~~2.Management’s~~2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations of Global Partners LP should be read in conjunction with the historical consolidated financial statements of Global Partners LP and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

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. 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 our SeriesA Preferred Units ~~(as defined below)~~ 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.

●

~~We depend upon marine, pipeline, rail~~The outbreak of COVID-19 and ~~truck transportation services~~certain developments in global oil markets have had, and may continue to have, material adverse consequences for ~~a substantial portion~~general economic, financial and business conditions, and could materially and adversely affect our business, financial condition and results of operation and those of our ~~logistics activities in transporting the products we sell. Implementation of regulations~~customers, suppliers and directives that adversely impact the market for transporting these products by rail or otherwise could adversely affect those activities. In addition, a disruption in these transportation services could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

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 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.

~~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 higher prices and to new technologies and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel-powered motor vehicles. Changing consumer preferences or driving habits could lead to new forms of

Our gasoline sales could be significantly reduced by a reduction in demand due to higher prices and to new technologies and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel‑powered motor vehicles. Changing consumer preferences or driving habits could lead to new forms of fueling destinations or potentially fewer customer visits to our sites, and decreases in sales. 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.~~

5452

Table of Contents

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 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 commodity prices, energy conservation, competition, the global economic climate, movement of products between foreign locales and within the United States, changes in refiner demand, weekly and monthly refinery output levels, 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 renewal 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.

●

~~Changes in government usage mandates and tax credits could adversely affect the availability and pricing of ethanol, 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 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 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 commodity prices, energy conservation, competition, the global economic climate, movement of products between foreign locales and within the United States, changes in refiner demand, weekly and monthly refinery output levels, 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 renewal 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 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.

●

A significant increase in interest rates could adversely affect our results of operations and cash available for distribution to our unitholders and ourability to service our indebtedness.

Table of Contents

●

Our gasoline station and convenience store business, including with the onset of the COVID-19 pandemic, 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.

~~Table of Contents~~

●

Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine products, and the FDA ~~has~~and states have enacted and are pursuing enaction ofnumerous regulations restricting the sale of such products. These governmental actions, as well as national, state and ~~local~~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 ~~a negative~~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.

~~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.

~~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.

~~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 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.

~~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.

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.

~~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.

~~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 ended December 31, ~~2018~~2019 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 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.

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Overview

~~Overview~~

General

~~General~~

We are a master limited partnership formed in March 2005. We own, control or have access to one of the largest terminal networks of refined petroleum products and renewable fuels in Massachusetts, Maine, Connecticut, Vermont, New Hampshire, Rhode Island, New York, New Jersey and Pennsylvania (collectively, the “Northeast”). We are one of

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the region’s largest independent owners, suppliers and operators of gasoline stations and convenience stores. As of September 30, ~~2019,~~2020, we had a portfolio of ~~1,566~~1,542 owned, leased and/or supplied gasoline stations, including ~~295~~278 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 the New England states and New 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~~mid-continent region of the United States and Canada.

Collectively, we sold approximately ~~$3.1~~$1.9 billion and ~~$9.4~~$5.8 billion of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane for the three and nine months ended September 30, ~~2019,~~2020, respectively. In addition, we had other revenues of approximately $0.1 billion and $0.3 billion for the three and nine months ended September 30, ~~2019,~~2020, 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 the New 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.

~~2019~~Our Perspective on Global and the COVID-19 Pandemic

Overview

The COVID-19 pandemic has continued to make its presence felt at home, in the office workplace and at our retail sites and terminal locations. We have successfully executed our business continuity plans and at this time we continue to work remotely. 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 has resulted in an economic downturn and restricted travel to, from and within the states in which we conduct our businesses. Federal, state and municipal “stay at home” or similar-like directives have resulted in decreases in the demand for gasoline and convenience store products. Social distancing guidelines and directives limiting food operations at our convenience stores have further contributed to a reduction in in-store traffic and sales. The demand for diesel fuel has similarly (but not as drastically) been impacted. We remain well positioned to pivot and address different (and, at times, conflicting) directives from federal, state and municipal authorities designed to mitigate the spread of the COVID-19 pandemic, permit the opening of businesses and promote an economic recovery. From mid-March into April, we saw reductions of more than 50% in gasoline volume and more than 20% in convenience store sales but have since seen increases in both gasoline volume and convenience store sales as some businesses reopened and directives from federal, state and municipal authorities became less restrictive. That said, 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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Given the uncertainty in the early part of 2020 surrounding the short-term and long-term impacts of COVID-19, including the timing of an economic recovery, early in the second quarter we took certain steps to increase liquidity and create additional financial flexibility. Such steps included a 25% decrease to our quarterly distribution on our common units to $0.39375 per unit for the period from January 1, 2020 to March 31, 2020. In addition, we borrowed $50.0 million under our revolving credit facility which was included in cash on our balance sheet. We also reduced planned expenses and 2020 capital spending. We amended our credit agreement to provide temporary adjustments to certain covenants. Given the stronger-than-expected performance in the second quarter, we paid down our revolving credit facility with the $50.0 million cash on hand and increased our planned 2020 capital spending. In addition, we have increased our quarterly distribution on our common units for each of the last two quarters.

Moving Forward – Our Perspective

The extent to which the COVID-19 pandemic may affect our operating results remains uncertain. The outbreak of 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, as compared to how we conducted our business in early March, reflect changes which may well 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.

2020 Events

~~2027~~2029 Notes Offering and ~~2022~~2023 Notes ~~Tender Offer and~~ Redemption—On ~~July 31, 2019,~~October 7, 2020, we and GLP Finance Corp. (the “Issuers”) issued ~~$400.0~~ $350.0 million aggregate principal amount of ~~7.00%~~6.875% senior notes due ~~2027~~2029 (the ~~“2027~~“2029 Notes”) to several initial purchasers (the ~~“2027~~“2029 Notes Initial Purchasers”) in a private placement exempt from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”). The 2027 Notes were resold by the 2027 Notes Initial Purchasers to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States pursuant to Regulation S under the Securities Act. We used the net proceeds from the offering to fund the ~~repurchase~~redemption of our ~~6.25%~~7.00% senior notes due ~~2022~~2023 (the ~~“2022~~“2023 Notes”) ~~in a tender offer~~ and to repay a portion of the borrowings outstanding under our credit agreement.

On July 31, 2019, the Issuers delivered a Notice of Full Redemption for all of the outstanding 2022 Notes to Deutsche Bank Trust Company Americas, as trustee. The redemption of the 2022 Notes occurred on August 30, 2019. Please read “—Liquidity and Capital Resources—Senior Notes” for additional information on the ~~2027~~2029 Notes.

Amended Credit Agreement—On ~~April 19, 2019,~~May 7, 2020, we and certain of our subsidiaries entered into the ~~third~~fourth amendment to third amended and restated credit agreement which, among other things, ~~extended~~provides temporary adjustments to certain covenants and reduces the ~~maturity date from April 30, 2020 to April 29, 2022~~total aggregate commitment by $130.0 million. See “—Liquidity and reduced by 0.25% the applicable rate under the existing revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit. See Note 9 of Notes to Consolidated Financial Statements for additional information.Capital Resources—Credit Agreement.”

~~2018 Events~~

~~Series A Preferred Unit Offering—On August 7, 2018, we issued 2,760,000 9.75% SeriesA Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units representing limited partner interests (the “SeriesA Preferred Units”) for $25.00 per SeriesA Preferred Unit in an offering registered under the Securities Act of 1933. We used the proceeds, net of underwriting discount and expenses, of $66.4million to reduce indebtedness under our credit agreement. See Note 15 of Notes to Consolidated Financial Statements for additional information.~~

~~Acquisition from Cheshire Oil Company, LLC—On July 24, 2018, we acquired the assets of ten company-operated gasoline stations and convenience stores from New Hampshire-based Cheshire Oil Company,LLC~~

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(“Cheshire”) for approximately $33.4 million, including inventory. The portfolio consisted of nine stores in New Hampshire and one in Brattleboro, Vermont. All of the locations are branded T-Bird Mini Marts and market Citgo fuel.

~~Acquisition from Champlain Oil Company, Inc.—~~On July 17, 2018, we acquired retail fuel and convenience store assets from Vermont-based Champlain Oil Company, Inc. (“Champlain”) for approximately $138.2 million, including inventory. The acquisition included 37 company-operated gasoline stations with Jiffy Mart-branded convenience stores in Vermont and New Hampshire and approximately 24 fuel sites that were either owned or leased, including lessee dealer and commission agent locations. The transaction also included fuel supply agreements for approximately 65 gasoline stations, primarily in Vermont and New Hampshire. See Note 17 of Notes to Consolidated Financial Statements for additional information.

~~Volumetric Ethanol Excise Tax Credit—~~In the first quarter of 2018, we recognized a one-time income item of approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit, which tax credit program expired in 2011. Based upon the significant passage of time from that 2011 expiration date, including underlying statutes of limitation, as of January 31, 2018 we determined that the liability was no longer required. The recognition of this one-time income item, which is included in gain on trustee taxes in the accompanying consolidated statements of operations for the three months ended March 31, 2018, did not impact cash flows from operations for the three months ended March 31, 2018 or for the year ended December 31, 2018.

Operating Segments

We purchase refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane 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 of the United States and Canada, transport it by rail and ship it

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by barge to refiners. We sell home heating oil, branded and unbranded gasoline and gasoline blendstocks, diesel, kerosene, residual oil and propane to home heating oil and propane 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 Renewable Volume Obligation (“RVO”). Our U.S. Environmental Protection Agency (“EPA”) obligations relative to renewable fuel reporting are comprised of foreign gasoline and diesel that we may import and blending operations at certain facilities.

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 stores, (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).

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As of September 30, ~~2019,~~2020, we had a portfolio of owned, leased and/or supplied gasoline stations, primarily in the Northeast, that consisted of the following:


Company operated	278	~~295~~
Commissioned agents	272	~~253~~
Lessee dealers	209	~~221~~
Contract dealers	783	~~797~~
Total	1,542	~~1,566~~

At our ~~company‑~~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~~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~~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 certain New England states pursuant to which we source and supply these distributors’ gasoline stations with ~~ExxonMobil‑branded~~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, and we respond to publicly-issued requests for product proposals and quotes.~~location. Our Commercial segment also includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity.

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Seasonality

~~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. 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 is 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.

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,

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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. A significant decrease in the price for crude oil could adversely affect the economics of domestic crude oil production which, in turn, could have an adverse effect on our crude oil logistics activities and sales. A significant decrease in crude oil differentials could also have an adverse effect on our crude oil logistics activities and sales.

●

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

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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 derivatives contracts and our contractual counterparties requiring 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. AImplementation 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 ~~which~~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 ~~activities.~~business operations. These events could result in service disruptions and increased ~~cost~~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.

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●

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, with particular impact to our GDSO segment, are seasonal and can be lower in the first and fourth quarters of the calendar year. 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. Travel and recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for gasoline that we sell. 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 the extent and duration of that impact is uncertain.

●

Our heating oil and residual oil financial results are seasonal and 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. Therefore, our results of operations in heating oil and residual oil for the first and fourth calendar quarters can be better than for the second and third quarters.

●

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 ~~in the Northeast~~ can decrease the total

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volume we sell and the gross profit realized on those sales. Therefore, our results of operations in heating oil and residual oil for the first and fourth calendar quarters can be better than for the second and third quarters.

●

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 three 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 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 EPA has implemented a Renewable Fuels Standard (“RFS”) 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 ~~biofuels~~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 the United States. A RIN is assigned to each gallon of renewable fuel produced in or imported into the United States. We are exposed to ~~the~~ volatility in the market price of RINs. We cannot predict the future prices of RINs. RIN prices are dependent upon a variety of factors, including EPA regulations related to the amount of RINs 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

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significantly higher price for RINs, or if we are otherwise unable to meet the EPA’s RFS mandates, our results of operations and cash flows could be 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 EPA’s regulations on the RFS program and 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. Congress has given the FDA broad authority to regulate tobacco and nicotine products, and the FDA and states have enacted and are pursuing enaction of numerous regulations

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·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 ~~local~~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. Our 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 ~~local~~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. In recent years, the transport of crude oil and ethanol has become subject to additional regulation. The establishment of more stringent design or construction standards, or other requirements for railroad tank cars that are used to transport crude oil and ethanol with too short of a timeframe for compliance may lead to shortages of compliant railcars available to transport crude oil and ethanol, which could adversely affect our businesses. Likewise, in recent years, efforts have commenced to seek to use federal, state and ~~local~~municipal laws to contest issuance of permits, contest renewal of permits and restrict the types of railroad tanks cars that can be used to deliver products, including, without limitation, crude oil and ethanol to bulk storage terminals. Were such laws to come into effect and were they to survive appeals and judicial review, they would potentially expose our operations to duplicative and possibly inconsistent regulation. 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.

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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, crude oil and propane, 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 ~~primarily~~ include the cost of acquiring products and all associated costs including shipping and handling

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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 ~~businesses.~~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.

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;

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our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;

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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

~~Table of Contents~~

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

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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.

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. ~~The~~While the majority of these expenses remains relatively stable, independent of the volumes through our system, ~~but~~they can fluctuate slightly 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 the National Weather Service and officially archived by the National Climatic Data Center. For purposes of evaluating our results of operations, we use the normal heating degree day amount as reported by the National Weather Service at its Logan International Airport station in Boston, Massachusetts.

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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,
	2019		2018		2019		2018
Net income (loss) attributable to Global Partners LP	$	15,080	$	(14,080)	$	36,695	$	51,375

									Three Months Ended				Nine Months Ended
									September 30,				September 30,
									2020		2019		2020		2019
Net income attributable to Global Partners LP									$	18,230	$	15,080	$	97,768	$	36,695
EBITDA (1)(2)	$	65,094	$	35,838	$	187,105	$	194,595	$	64,965	$	65,094	$	235,299	$	187,105
Adjusted EBITDA (1)(2)	$	66,060	$	37,192	$	187,496	$	200,849	$	65,859	$	66,060	$	237,849	$	187,496
Distributable cash flow (3)(4)(5)	$	30,405	$	5,312	$	86,281	$	106,082	$	31,333	$	30,405	$	149,134	$	86,281
Wholesale Segment:
Volume (gallons)		995,638		924,609		3,057,823		2,591,816		837,768		995,638		2,631,430		3,057,823
Sales
Gasoline and gasoline blendstocks	$	1,466,111	$	1,594,543	$	4,106,434	$	3,615,862	$	767,538	$	1,466,111	$	2,182,321	$	4,106,434
Crude oil (6)		13,646		15,643		56,174		74,047		57,518		13,646		73,010		56,174
Other oils and related products (7)		312,534		279,467		1,343,417		1,372,042		235,359		312,534		1,069,921		1,343,417
Total	$	1,792,291	$	1,889,653	$	5,506,025	$	5,061,951	$	1,060,415	$	1,792,291	$	3,325,252	$	5,506,025
Product margin
Gasoline and gasoline blendstocks	$	20,194	$	5,586	$	76,568	$	54,423	$	16,318	$	20,194	$	83,241	$	76,568
Crude oil (6)		(3,019)		(7,606)		(10,043)		2,885		(2,729)		(3,019)		2,004		(10,043)
Other oils and related products (7)		17,071		5,175		40,566		31,477		14,031		17,071		58,764		40,566
Total	$	34,246	$	3,155	$	107,091	$	88,785	$	27,620	$	34,246	$	144,009	$	107,091
Gasoline Distribution and Station Operations Segment:
Volume (gallons)		423,327		424,111		1,214,077		1,181,294		376,317		423,327		1,006,300		1,214,077
Sales
Gasoline	$	1,010,655	$	1,110,529	$	2,866,496	$	3,088,906	$	696,184	$	1,010,655	$	1,896,960	$	2,866,496
Station operations (8)		128,942		124,481		354,127		312,455		122,856		128,942		325,577		354,127
Total	$	1,139,597	$	1,235,010	$	3,220,623	$	3,401,361	$	819,040	$	1,139,597	$	2,222,537	$	3,220,623
Product margin
Gasoline	$	107,620	$	91,335	$	282,919	$	238,434	$	101,405	$	107,620	$	305,405	$	282,919
Station operations (8)		61,109		57,265		169,621		149,479		57,462		61,109		154,904		169,621
Total	$	168,729	$	148,600	$	452,540	$	387,913	$	158,867	$	168,729	$	460,309	$	452,540
Commercial Segment:
Volume (gallons)		171,505		166,482		546,261		466,158		139,925		171,505		428,418		546,261
Sales	$	313,765	$	344,172	$	1,006,171	$	934,989	$	181,927	$	313,765	$	578,263	$	1,006,171
Product margin	$	7,213	$	5,478	$	18,217	$	16,524	$	2,855	$	7,213	$	11,773	$	18,217
Combined sales and product margin:
Sales	$	3,245,653	$	3,468,835	$	9,732,819	$	9,398,301	$	2,061,382	$	3,245,653	$	6,126,052	$	9,732,819
Product margin (9)	$	210,188	$	157,233	$	577,848	$	493,222	$	189,342	$	210,188	$	616,091	$	577,848
Depreciation allocated to cost of sales		(22,419)		(22,259)		(66,092)		(64,657)		(20,101)		(22,419)		(61,165)		(66,092)
Combined gross profit	$	187,769	$	134,974	$	511,756	$	428,565	$	169,241	$	187,769	$	554,926	$	511,756

GDSO portfolio as of September 30, 2019 and 2018:		2019		2018

GDSO portfolio as of September 30, 2020 and 2019:										2020		2019
Company operated		295		301						278		295
Commissioned agents		253		259						272		253
Lessee dealers		221		239						209		221
Contract dealers		797		790						783		797
Total GDSO portfolio		1,566		1,589						1,542		1,566

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	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Weather conditions:
Normal heating degree days		96			96			3,750			3,750
Actual heating degree days		72			28			3,320			3,405
Variance from normal heating degree days		(25)	%		(71)	%		(11)	%		(9)	%
Variance from prior period actual heating degree days		157	%		(3)	%		(2)	%		(4)	%

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Weather conditions:

Normal heating degree days

96

96

3,750

3,780

Actual heating degree days

28

29

3,405

3,542

Variance from normal heating degree days

(71)
%

(70)
%

(9)
%

(6)
%
Variance from prior period actual heating degree days

(3)
%

(41)
%

(4)
%

2
%

(1)

~~(1)~~

EBITDA and Adjusted EBITDA are non-GAAP financial measures which are 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.

(2)

~~(2)~~

EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2019 include a $13.1 million loss on the early extinguishment of debt related to our repurchase of our 6.25% senior notes due 2022 (see Note 9 of Notes to Consolidated Financial Statements for additional information). EBITDA and Adjusted EBITDA for the nine months ended September 30, 2018 include a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax Credit (see Note 1 of Notes to Consolidated Financial Statements for additional information).

2022.

(3)

~~(3)~~

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 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.

(4)

~~(4)~~

Distributable cash flow includes a net loss (gain) on sale and disposition of assets and ~~goodwill and~~ long-lived asset impairment of $0.9 million ~~and $1.3 million~~ for each of the three months ended September 30, 2020 and 2019, and ~~2018, respectively,~~$2.5 million and $0.3 ~~million and $6.2~~ million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Excluding these charges, distributable cash flow would have been ~~$31.3~~$32.2 million and ~~$6.6~~$31.3 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$86.6~~$151.6 million and ~~$112.3~~$86.6 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

(5)

~~(5)~~

Distributable cash flow for the three and nine months ended September 30, 2019 includes a $13.1 million loss on the early extinguishment of debt related to the repurchase of our 6.25% senior notes due 2022. Distributable cash flow for the nine months ended September 30, 2018 includes a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax Credit.

(6)

~~(6)~~

Crude oil consists of our crude oil sales and revenue from our logistics activities.

(7)

~~(7)~~

Other oils and related products primarily consist of distillates, residual oil and propane.

(8)

~~(8)~~

Station operations consist of convenience stores sales, rental income and sundries.

(9)

~~(9)~~

Product margin is a non-GAAP financial measure which is discussed above under “—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,
	2020		2019		2020		2019
Reconciliation of net income to EBITDA and Adjusted EBITDA:
Net income	$	18,192	$	14,893	$	97,240	$	36,058
Net loss attributable to noncontrolling interest		38		187		528		637
Net income attributable to Global Partners LP		18,230		15,080		97,768		36,695
Depreciation and amortization, excluding the impact of noncontrolling interest		24,745		27,110		75,192		81,022
Interest expense, excluding the impact of noncontrolling interest		19,854		22,091		62,544		68,113
Income tax expense (benefit)		2,136		813		(205)		1,275
EBITDA (1)		64,965		65,094		235,299		187,105
Net loss (gain) on sale and disposition of assets		691		323		623		(252)
Long-lived asset impairment		203		643		1,927		643
Adjusted EBITDA (1)	$	65,859	$	66,060	$	237,849	$	187,496

Reconciliation of net cash provided by operating activities to EBITDA and Adjusted EBITDA:
Net cash provided by operating activities	$	88,286	$	143,017	$	250,289	$	109,525
Net changes in operating assets and liabilities and certain non-cash items		(45,321)		(100,890)		(77,621)		8,077
Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest		10		63		292		115
Interest expense, excluding the impact of noncontrolling interest		19,854		22,091		62,544		68,113
Income tax expense (benefit)		2,136		813		(205)		1,275
EBITDA (1)		64,965		65,094		235,299		187,105
Net loss (gain) on sale and disposition of assets		691		323		623		(252)
Long-lived asset impairment		203		643		1,927		643
Adjusted EBITDA (1)	$	65,859	$	66,060	$	237,849	$	187,496

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Reconciliation of net income (loss) to EBITDA and Adjusted EBITDA:

Net income (loss)

$
14,893

$
(14,464)

$
36,058

$
50,233

Net loss attributable to noncontrolling interest

187

384

637

1,142

Net income (loss) attributable to Global Partners LP

15,080

(14,080)

36,695

51,375

Depreciation and amortization, excluding the impact of noncontrolling interest

27,110

27,310

81,022

78,483

Interest expense, excluding the impact of noncontrolling interest

22,091

22,579

68,113

65,637

Income tax expense (benefit)

813

29

1,275

(900)

EBITDA (1)

65,094

35,838

187,105

194,595

Net loss (gain) on sale and disposition of assets

323

940

(252)

5,840

Goodwill and long-lived asset impairment

643

414

643

414

Adjusted EBITDA (1)

$
66,060

$
37,192

$
187,496

$
200,849

Reconciliation of net cash provided by (used in) operating activities to EBITDA and Adjusted EBITDA:

Net cash provided by (used in) operating activities

$
143,017

$
(29,676)

$
109,525

$
(45,902)

Net changes in operating assets and liabilities and certain non-cash items

(100,890)

42,798

8,077

175,545

Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest

63

108

115

215

Interest expense, excluding the impact of noncontrolling interest

22,091

22,579

68,113

65,637

Income tax expense (benefit)

813

29

1,275

(900)

EBITDA (1)

65,094

35,838

187,105

194,595

Net loss (gain) on sale and disposition of assets

323

940

(252)

5,840

Goodwill and long-lived asset impairment

643

414

643

414

Adjusted EBITDA (1)

$
66,060

$
37,192

$
187,496

$
200,849

(1)

~~(1)~~

2022.

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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,
	2020		2019		2020		2019
Reconciliation of net income to distributable cash flow:
Net income	$	18,192	$	14,893	$	97,240	$	36,058
Net loss attributable to noncontrolling interest		38		187		528		637
Net income attributable to Global Partners LP		18,230		15,080		97,768		36,695
Depreciation and amortization, excluding the impact of noncontrolling interest		24,745		27,110		75,192		81,022
Amortization of deferred financing fees and senior notes discount		1,329		1,352		3,896		4,679
Amortization of routine bank refinancing fees		(1,008)		(902)		(2,933)		(2,814)
Maintenance capital expenditures, excluding the impact of noncontrolling interest		(11,963)		(12,235)		(24,789)		(33,301)
Distributable cash flow (1)(2)		31,333		30,405		149,134		86,281
Distributions to Series A preferred unitholders (3)		(1,682)		(1,682)		(5,046)		(5,046)
Distributable cash flow after distributions to Series A preferred unitholders	$	29,651	$	28,723	$	144,088	$	81,235

Reconciliation of net cash provided by operating activities to distributable cash flow:
Net cash provided by operating activities	$	88,286	$	143,017	$	250,289	$	109,525
Net changes in operating assets and liabilities and certain non-cash items		(45,321)		(100,890)		(77,621)		8,077
Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest		10		63		292		115
Amortization of deferred financing fees and senior notes discount		1,329		1,352		3,896		4,679
Amortization of routine bank refinancing fees		(1,008)		(902)		(2,933)		(2,814)
Maintenance capital expenditures, excluding the impact of noncontrolling interest		(11,963)		(12,235)		(24,789)		(33,301)
Distributable cash flow (1)(2)		31,333		30,405		149,134		86,281
Distributions to Series A preferred unitholders (3)		(1,682)		(1,682)		(5,046)		(5,046)
Distributable cash flow after distributions to Series A preferred unitholders	$	29,651	$	28,723	$	144,088	$	81,235

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Reconciliation of net income (loss) to distributable cash flow:

Net income (loss)
$
14,893

$
(14,464)

$
36,058

$
50,233

Net loss attributable to noncontrolling interest

187

384

637

1,142

Net income (loss) attributable to Global Partners LP

15,080

(14,080)

36,695

51,375

Depreciation and amortization, excluding the impact of noncontrolling interest

27,110

27,310

81,022

78,483

Amortization of deferred financing fees and senior notes discount

1,352

1,720

4,679

5,150

Amortization of routine bank refinancing fees

(902)

(1,022)

(2,814)

(3,066)

Maintenance capital expenditures, excluding the impact of noncontrolling interest

(12,235)

(8,616)

(33,301)

(25,860)

Distributable cash flow (1)(2)(3)

30,405

5,312

86,281

106,082

Distributions to Series A preferred unitholders (4)

(1,682)

(1,009)

(5,046)

(1,009)

Distributable cash flow after distributions to Series A preferred unitholders
$
28,723

$
4,303

$
81,235

$
105,073

Reconciliation of net cash provided by (used in) operating activities to distributable cash flow:

Net cash provided by (used in) operating activities
$
143,017

$
(29,676)

$
109,525

$
(45,902)

Net changes in operating assets and liabilities and certain non-cash items

(100,890)

42,798

8,077

175,545

Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest

63

108

115

215

Amortization of deferred financing fees and senior notes discount

1,352

1,720

4,679

5,150

Amortization of routine bank refinancing fees

(902)

(1,022)

(2,814)

(3,066)

Maintenance capital expenditures, excluding the impact of noncontrolling interest

(12,235)

(8,616)

(33,301)

(25,860)

Distributable cash flow (1)(2)(3)

30,405

5,312

86,281

106,082

Distributions to Series A preferred unitholders (4)

(1,682)

(1,009)

(5,046)

(1,009)

Distributable cash flow after distributions to Series A preferred unitholders
$
28,723

$
4,303

$
81,235

$
105,073

(1)

~~(1)~~

(2)

~~(2)~~

(3)

~~(3)~~

Distributable cash flow for the three and nine months ended September 30, 2019 includes a $13.1 million loss on the early extinguishment of debt related to the repurchase of our 6.25% senior notes due 2022 (see Note 9 of Notes to Consolidated Financial Statements for additional information). Distributable cash flow for the nine months ended September 30, 2018 includes a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent liability related to a Volumetric Ethanol Excise Tax Credit.

2022.

(4)

~~(4)~~

Distributions to Series A preferred unitholders represent the distributions ~~earned by~~payable to the preferred unitholders during the period. Distributions on the Series A Preferred Units are cumulative and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year ~~commencing on November 15, 2018.~~

Results of Operations

Consolidated Sales

Our total sales were ~~$3.2~~$2.0 billion and ~~$3.5~~$3.2 billion for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~decreasing $223.2 million,~~a decrease of $1.2 billion, or 6%37%, due to ~~a decrease~~decreases in ~~prices.~~prices and volume sold. Our aggregate volume of product sold was ~~1.6~~1.4 billion gallons and ~~1.5~~1.6 billion gallons for the three months ended September 30, 2020 and 2019, ~~and 2018, respectively. The increase~~respectively, declining 236 million gallons including decreases of ~~approximately 0.1 billion gallons in volume sold includes increases of 71~~158 million gallons in our Wholesale

~~Table of Contents~~

segment due to a decline in gasoline and gasoline blendstocks, partially offset by increased volume in crude oil and other oils and related products, 47 million gallons in our GDSO segment and 531 million gallons in our Commercial ~~segment, offset by a decrease of 1 million gallons in our GDSO~~ segment.

Our total sales were ~~$9.7~~$6.1 billion and ~~$9.4~~$9.7 billion for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$0.3~~ $3.6 billion, or 3%37%, due to ~~an increase~~decreases in prices and volume sold. Our aggregate volume of

Table of Contents

product sold was ~~4.8~~4.1 billion gallons and ~~4.2~~4.8 billion gallons for the nine months ended September 30, 2020 and 2019, ~~and 2018, respectively. The increase~~respectively, declining 752 million gallons including decreases of ~~0.6 billion gallons in volume sold includes increases of 466~~426 million gallons in our Wholesale segment ~~primarily~~due to a decline in gasoline and gasoline blendstocks 80partially offset by increased volume in crude oil and other oils and related products, 208 million gallons in our GDSO segment and 118 million gallons in our Commercial ~~segment and 33 million gallons in our GDSO~~ segment.

Gross Profit

Our gross profit was $169.2 million and $187.8 million ~~and $135.0 million~~ for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$52.8~~$18.6 million, or ~~39%~~10%, ~~primarily~~ due to ~~higher fuel~~lower product margins ~~(cents per gallon)~~ in ~~our GDSO segment and to more favorable market conditions in our Wholesale segment.~~ all three segments.

Our gross profit was ~~$511.8~~$554.9 million and ~~$428.6~~$511.8 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$83.2~~ $43.1 million, or ~~19%~~8%, primarily due to more favorable market conditions in ~~gasoline and gasoline blendstocks and other oils and related products in~~ our Wholesale segment, ~~and to~~largely in the second quarter. During the second quarter of 2020, there was a significant recovery in the supply/demand imbalance at the end of the first quarter. The forward product pricing curve flattened which positively impacted our Wholesale segment in the second quarter. Our gross profit also benefitted from higher fuel margins (cents per gallon) ~~and the acquisitions of Champlain and Cheshire~~ in ~~July 2018 (collectively our “Recent Acquisitions”)~~gasoline distribution in our GDSO ~~segment. The increase~~segment which offset a decrease in ~~gross profit was offset by~~fuel volume and a ~~decline in crude oil product margin~~decrease in our Wholesale segment, primarily due to $21.6 million in revenue recognized in the first nine months of 2018 related to a take-or-pay contract with one particular customer which was not recognized for the same period in 2019 as that contract expired in June 2018.station operations product margin.

Results for Wholesale Segment

Gasoline and Gasoline Blendstocks. Sales from wholesale gasoline and gasoline blendstocks were ~~$1.5~~$0.8 billion and ~~$1.6~~$1.5 billion for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, a decrease of ~~$0.1~~$0.7 billion, or 8%, primarily due to a decrease in prices. Our gasoline and gasoline blendstocks product margin was $20.2 million and $5.6 million for the three months ended September 30, 2019 and 2018, respectively, an increase of $14.6 million, or 261%, primarily due to more favorable market conditions in gasoline and gasoline blendstocks compared to the same period in 2018.

~~Sales from wholesale gasoline and gasoline blendstocks were $4.1 billion and $3.6 billion for the nine months ended September 30, 2019 and 2018, respectively, an increase of $0.5 billion, or 14%~~47%, due to ~~an increase~~decreases in prices and volume sold. Our gasoline and gasoline blendstocks product margin was ~~$76.5~~$16.3 million and ~~$54.4~~$20.2 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of $3.9 million, or 19%, primarily due to less favorable market conditions in gasoline compared to the same period in 2019.

Sales from wholesale gasoline and gasoline blendstocks were $2.2 billion and $4.1 billion for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $1.9 billion, or 46%, due to decreases in prices and volume sold. Our gasoline and gasoline blendstocks product margin was $83.2 million and $76.5 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$22.1~~$6.7 million, or ~~41%~~9%, primarily due to more favorable market conditions, largely in the second quarter. During the second quarter of 2020, there was a significant recovery in the supply/demand imbalance at the end of the first quarter. The forward product pricing curve flattened which positively impacted our product margins. In the first quarter of 2020, the COVID-19 pandemic and the price war between Saudi Arabia and Russia caused a rapid decline in prices, steepening the forward product pricing curve which negatively impacted our product margin in gasoline ~~and gasoline blendstocks during~~for the ~~third quarter~~first three months of ~~2019.~~2020.

Crude Oil. Crude oil sales and logistics revenues were ~~$13.6~~$57.5 million and ~~$15.6~~$13.6 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~a decrease~~an increase of ~~$2.0~~$43.9 million, or ~~13%~~322%, due to ~~a decrease~~an increase in ~~prices.~~volume sold. Our crude oil product margin was ($~~3.0~~2.7 million) and ($~~7.6~~3.0 million) for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$4.6 million, or 60%, primarily due to lower railcar related expenses.~~ $0.3 million.

Crude oil sales and logistics revenues were ~~$56.1~~$73.0 million and ~~$74.0~~$56.1 million for the nine months ended September 30, 2020 and 2019, respectively, an increase of $16.9 million, or 30%, due to an increase in volume sold. Our crude oil product margin was $2.0 million and ~~2018,~~($10.0 million) for the nine months ended September 30, 2020 and 2019, respectively, an increase of $12.0 million, or 120%, primarily due to more favorable market conditions largely in the second quarter including the flattening of the forward product pricing curve.

Other Oils and Related Products. Sales from other oils and related products (primarily distillates and residual oil) were $235.3 million and $312.5 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of ~~$17.9~~$77.2 million, or ~~24%~~25%, ~~primarily~~ due ~~to the decrease in take-or-pay contract revenue and~~ to a decrease in prices, partially offset by an increase in volume sold. Our ~~crude oil~~ product margin from other oils and related products was ~~($10.0 million)~~$14.0 million and ~~$2.9~~$17.1 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of $3.1 million, or 18%, due to less favorable market conditions largely in residual oil compared to the same period in 2019.

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Sales from other oils and related products were $1.0 billion and $1.3 billion for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, decreasing $273.5 million, or 20%, due to a decrease ~~of $12.9 million, or 448%. Our product margin for the first nine months of 2018 was positively impacted~~in prices, partially offset by $21.6 million in revenue recognized related to a take-or-pay contract with one particular customer which was not recognized for the same period in 2019 as that contract expired in June 2018. Our product margin for the first nine months of 2019 was favorably impacted by lower railcar expenses and an increase in volume sold.

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~~Other Oils and Related Products. Sales from other oils and related products (primarily distillates, residual oil and propane) were $0.3 billion for each of the three months ended September 30, 2019 and 2018.~~ Our product margin from other oils and related products was ~~$17.1~~$58.8 million and ~~$5.2~~$40.6 million for the ~~three~~nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$11.9~~$18.2 million, or ~~229%~~45%, primarily due to more favorable market conditions in distillates, largely in the second quarter. During the second quarter of 2020, there was a significant recovery in the supply/demand imbalance at the end of the first quarter. The forward product pricing curve flattened which positively impacted our product margins. In the first quarter of 2020, the COVID-19 pandemic and ~~residual oil.~~ the price war between Saudi Arabia and Russia caused a rapid decline in prices, steepening the forward product pricing curve, which negatively impacted our product margins for the first three months of 2020.

Results for Gasoline Distribution and Station Operations Segment

Gasoline Distribution. Sales from gasoline distribution were $0.7 billion and $1.0 billion for the three months ended September 30, 2020 and 2019, respectively, a decrease of $0.3 billion, or 31%, due to decreases in prices and volume sold largely due to the impact of the COVID-19 pandemic. Our product margin from gasoline distribution was $101.4 million and $107.6 million for the three months ended September 30, 2020 and 2019, respectively, a decrease of $6.2 million, or 6%. While in the third quarter of 2020 our fuel margins (cents per gallon) were higher than the same period in 2019, in the third quarter of 2019 wholesale gasoline prices declined which favorably impacted our fuel margins (cents per gallon).

Sales from ~~other oils and related products~~gasoline distribution were ~~$1.3~~$1.9 billion and ~~$1.4~~$2.9 billion for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~decreasing $28.6 million~~a decrease of $1.0 billion, or 2%34%, ~~primarily~~ due to ~~a decrease~~decreases in ~~prices.~~prices and volume sold largely due to the impact of the COVID-19 pandemic. Our product margin from ~~other oils and related products~~gasoline distribution was ~~$40.6~~$305.4 million and ~~$31.5~~$282.9 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$9.1~~$22.5 million, or ~~29%~~8%, ~~primarily due to more favorable market conditions in distillates.~~

~~Results for Gasoline Distribution and Station Operations Segment~~

~~Gasoline Distribution~~. Sales from gasoline distribution were $1.0 billion and $1.1 billion for the three months ended September 30, 2019 and 2018, respectively, a decrease of $0.1 billion or 9%, primarily due to a decrease in prices. Our product margin from gasoline distribution was $107.6 million and $91.3 million for the three months ended September 30, 2019 and 2018, respectively, an increase of $16.3 million, or 18%, primarily due to higher fuel margins (cents per gallon)~~. Wholesale gasoline~~ which more than offset the decline in volume sold. Our product margin for the first nine months of 2020 benefitted from declining wholesale prices ~~declined during~~in the ~~quarter.~~first quarter of 2020, primarily in March due to the COVID-19 pandemic and geopolitical events and to higher fuel margins (cents per gallon) in both the second and third quarters compared to the same periods in 2019. Declining wholesale gasoline prices can improve our gasoline product margin, the extent of which depends on the magnitude and duration of ~~that~~the decline.

Sales from gasoline distribution were $2.9 billion and $3.1 billion for the nine months ended September 30, 2019 and 2018, respectively, a decrease of $0.2 billion, or 7%, primarily due to a decrease in prices. Our product margin from gasoline distribution was $282.9 million and $238.4 million for the nine months ended September 30, 2019 and 2018, respectively, an increase of $44.5 million, or 19%, primarily due to higher fuel margins (cents per gallon) and our Recent Acquisitions.

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 ~~$128.9~~$122.8 million and ~~$124.5~~$128.9 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$4.4~~$6.1 million, or 4%5%. Our product margin from station operations was ~~$61.1~~$57.5 million and ~~$57.3~~$61.1 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$3.8~~$3.6 million, or ~~7%,~~6%. The decreases in sales and product margin are primarily due to less activity at our ~~Recent Acquisitions.~~convenience stores, primarily due to the impact of the COVID-19 pandemic.

Sales from our station operations were ~~$354.1~~$325.6 million and ~~$312.5~~$354.1 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$41.6~~ $28.5 million, or ~~13%~~8%. Our product margin from station operations was ~~$169.6~~$154.9 million and ~~$149.5~~$169.6 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$20.1~~$14.7 million, or ~~13%,~~9%. The decreases in sales and product margin are primarily due to less activity at our ~~Recent Acquisitions.~~convenience stores, primarily due to the impact of the COVID-19 pandemic.

Results for Commercial Segment

Our commercial sales were ~~$313.8~~$181.9 million and ~~$344.2~~$313.8 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, a decrease of ~~$30.4~~ $131.9 million, or 9%42%, due to ~~a decrease~~decreases in ~~prices.~~prices and volume sold. Our commercial product margin was ~~$7.2~~$2.8 million and ~~$5.5~~$7.2 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$1.7~~$4.4 million, or ~~31%.~~61%, primarily due to a decrease in bunkering activity.

Our commercial sales were ~~$1.0~~$0.6 billion and ~~$0.9~~$1.0 billion for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~increasing $71.2~~ decreasing $427.9 million, or 8%42%, due to ~~an increase~~decreases in prices and volume sold. Our commercial product

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margin was ~~$18.2~~$11.8 million and ~~$16.5~~$18.2 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$1.7~~$6.4 million, or ~~10%.~~35%, primarily due to a decrease in bunkering activity.

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Selling, General and Administrative Expenses

SG&A expenses were ~~$45.3~~$43.2 million and ~~$42.1~~$45.3 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$3.2~~$2.1 million, or 8%5%, including ~~increases~~decreases of ~~$5.0~~$3.6 million in accrued discretionary incentive compensation and ~~$2.5~~$0.6 million in various other SG&A expenses, offset by increases of $1.2 million in professional fees, $0.7 million in wages and benefits ~~in part, to support our GDSO business, including our Recent Acquisitions, partially offset by $3.6~~and $0.2 million in ~~acquisition~~ costs ~~incurred in~~associated with the ~~third quarter of 2018 that were not incurred in the same period of 2019 and to a decrease of $0.7 million in various other SG&A expenses.~~ COVID-19 pandemic.

SG&A expenses were ~~$127.4~~$143.2 million and ~~$121.4~~127.4 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, an increase of ~~$6.0~~$15.8 million, or 5%12%, including increases of ~~$7.5~~$8.6 million in accrued discretionary incentive compensation, $2.8 million in wages and benefits, ~~in part to support our GDSO business, including our Recent Acquisitions, $4.6~~$2.0 million in ~~incentive compensation and $1.4~~professional fees, $1.2 million in ~~license fees, partially offset by $3.8~~costs associated with the COVID-19 pandemic, $1.0 million in ~~acquisitions~~advertising costs ~~incurred in the first nine months of 2018 that were not incurred in the same period of 2019~~ and ~~to a decrease of $3.7~~$0.2 million in various other SG&A expenses.

Operating Expenses

Operating expenses were ~~$87.8~~$82.2 million and ~~$83.8~~$87.8 million for the three months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$4.0~~$5.6 million, or ~~5%. The increase was primarily due to increases~~6%, including a decrease of ~~$3.1~~$6.4 million associated with our GDSO operations, ~~largely~~in part due to ~~our Recent Acquisitions,~~lower credit card fees due to the reduction in volume and ~~$0.9~~ price, lower salary expense primarily due to reduced store hours and lower maintenance and repair expenses, offset by an increase in expenses of $0.8 million associated with our terminal operations.

Operating expenses were ~~$257.2~~$241.5 million and ~~$234.0~~$257.2 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$23.2~~$15.7 million, or ~~10%. The increase was primarily due to increases~~6%, including a decrease of ~~$20.8~~ $14.7 million associated with our GDSO operations, ~~largely~~in part due to lower credit card fees due to the reduction in volume and price, lower salary expense in part due to reduced store hours, lower maintenance and repair expenses and lower expenses due to the sale of sites. In addition, operating expenses at our ~~Recent Acquisitions,~~terminals decreased $1.0 million, primarily due to lower maintenance and ~~$2.4 million associated with our terminal operations.~~repair expenses.

Lease Exit and Termination Gain ~~on Trustee Taxes~~

During the nine months ended September 30, 2018, we recognized a one-time gain of approximately $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit, which tax credit program expired in 2011. Based upon the significant passage of time from that 2011 expiration date, including underlying statutes of limitation, as of January 31, 2018 we determined that the liability was no longer required.

~~Lease Exit and Termination Gain~~

~~During the nine months ended September~~ 30, 2019, we were released from certain of our remaining obligations to provide future railcar storage, freight, insurance and other services for railcars under a fleet management services agreement associated with our 2016 voluntary termination of a railcar sublease. The release of certain obligations resulted in a $0.5 million reduction of the remaining accrued incremental costs, which benefit is included in lease exit and termination gain in the accompanying ~~statements~~statement of operations for the nine months ended September 30, 2019.

During the quarter ended September 30, 2018, we were released from certain of our obligations to provide future railcar storage, freight, insurance and other services for railcars under a fleet management services agreement associated with our 2016 voluntary termination of a railcar sublease. The release of certain obligations resulted in a $3.5 million reduction of the remaining accrued incremental costs, which benefit is included in lease exit and termination gain in the accompanying statements of operations for the three and nine months ended September 30, 2018.

Amortization Expense

Amortization expense related to intangible assets was ~~$2.8~~$2.7 million and ~~$3.1~~$2.8 million for the three months ended September 30, 2020 and 2019, respectively, and ~~2018, respectively, a decrease of $0.3 million, or 10%, primarily due to intangibles that became fully amortized in the third quarter of 2019.~~

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~~Amortization expense was $8.7~~$8.1 million and ~~$8.0~~$8.7 million for the nine months ended September 30, 2020 and 2019, ~~and 2018, respectively, an increase of $0.7 million, or 9%.~~respectively.

Net (Loss) Gain on Sale and Disposition of Assets

Net (loss) gain on sale and disposition of assets was ($~~0.3~~0.7 million) and ($~~0.9~~0.3 million) for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ($0.6 million) and $0.3 million ~~and ($5.8 million)~~ for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, primarily due to the sale of GDSO sites.

~~Goodwill and~~ 70

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Long-Lived Asset Impairment

We recognized aan impairment charge relating to certain right of use assets allocated to the GDSO segment in the amount of $0.2 million for each of the three and nine months ended September 30, 2020 and to the Wholesale segment in the amount of $0 and $1.7 million for the three and nine months ended September 30, 2020, respectively.

We recognized an impairment charge relating to long-lived ~~asset impairment charge~~assets used at certain gasoline stations and convenience stores in the amount of $0.6 million for each of the three and nine months ended September 30, ~~2019 and $0.4 million for each of~~2019. These assets are allocated to the ~~three and nine months ended September 30, 2018 relating to long-lived assets used at certain gasoline stations and convenience stores associated with our~~ GDSO segment. ~~See Note 7 of Notes to Consolidated Financial Statements for additional information.~~

Interest Expense

Interest expense was ~~$22.1~~$19.9 million and ~~$22.6~~$22.1 million for the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, a decrease of ~~$0.5~~$2.2 million, or 2%10%, ~~primarily~~ due to lower average balances on our credit ~~facilities.~~facilities and lower interest rates.

Interest expense was ~~$68.1~~$62.5 million and ~~$65.6~~$68.1 million for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$2.5~~$5.6 million, or 4%8%, ~~primarily~~ due to ~~higher~~lower average balances on our credit facilities and ~~higher~~lower interest ~~rates.~~rates, which more than offset the $0.7 million write-off of deferred financing fees associated with the amendment to our credit agreement in May 2020.

Loss on Early Extinguishment of Debt

As a result of the repurchase of our 6.25% senior notes due 2022 on July 31, 2019, we recorded a $13.1 million loss from early extinguishment of debt for each of the three and nine months ended September 30, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-off of remaining unamortized original issue discount and deferred financing fees. ~~Please read “—Liquidity and Capital Resources—Senior Notes” for additional information.~~

Income Tax (Expense) Benefit

Income tax ~~expense~~(expense) benefit was ($2.1 million) and ($0.8 million) for the three months ended September 30, 2020 and 2019, respectively, and ~~immaterial for the three months ended September 30, 2018. Income tax (expense) benefit was~~$0.2 million and ($1.3 million) ~~and $0.9 million~~ for the nine months ended September 30, 2020 and 2019, ~~and 2018, respectively. The income tax (expense) benefit recognized primarily~~respectively, which reflects the income tax (expense) benefit from the operating results of GMG, which is a taxable entity for federal and state income tax purposes. For the nine months ended September 30, 2020, the income tax benefit consists of an income tax benefit of $6.3 million (discussed below) offset by an income tax expense of ($6.1 million).

On March 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 strengthen the 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 ended September 30, 2020. We expect to receive cash refunds totaling $15.8 million associated with the carryback of losses generated in 2018 to the 2016 and 2017 tax years, and this income tax receivable is included in prepaid expenses and other current assets in the accompanying consolidated balance sheet as of September 30, 2020.

Net Loss Attributable to Noncontrolling Interest

In February 2013, we acquired a 60% membership interest in Basin Transload. The net loss attributable to the noncontrolling interest was ~~$0.2 million and $0.3 million~~immaterial for the three months ended September 30, ~~2019~~2020 and ~~2018, respectively, and $0.6~~$0.2 million for the three

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months ended September 30, 2019. The loss attributable to the noncontrolling interest was $0.5 million and ~~$1.1~~$0.6 million for the nine months ended September 30, 2020 and 2019, ~~and 2018, respectively, which~~respectively. The net loss represents the 40% noncontrolling ownership of the net loss reported. In connection with the terms of an agreement between us and the minority members of Basin Transload, on September 29, 2020, we acquired the minority members’ collective 40% interest in Basin Transload (see Note 18, “Legal Proceedings” for additional information).

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

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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.

Given the uncertainty surrounding the short-term and long-term impacts of COVID-19, including the timing of an economic recovery, early in the second quarter we took certain steps to increase liquidity and create additional financial flexibility. Such steps included a 25% decrease to our quarterly distribution on our common units for the period from January 1, 2020 to March 31, 2020. In addition, we borrowed $50.0 million under our revolving credit facility which was included in cash on our balance sheet. We also reduced planned expenses and 2020 capital spending. We amended our credit agreement to provide temporary adjustments to certain covenants. Given the stronger-than-expected performance in the second quarter, we paid down our revolving credit facility with the $50.0 million cash on hand and increased our planned 2020 capital spending. In addition, we increased our quarterly distribution on our common units for each of the second and third quarters. We believe that our current level of cash and borrowing capacity under our credit agreement will be sufficient to meet our liquidity needs.

Working capital was ~~$250.8~~$327.7 million and ~~$292.2~~$250.6 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, ~~a decrease of $41.4 million, primarily due to~~ an increase of ~~$65.3~~$77.1 million. Changes in current assets and current liabilities increasing working capital include (i) decreases of $186.6 million in accounts payable and $138.8 million in the current portion of our ~~lease liability related~~working capital revolving credit facility, primarily due to ~~the adoption~~lower prices, and (ii) an increase of ~~ASC 842 (see Note 2~~$44.7 million in derivatives, for a total increase in working capital of ~~Notes~~$370.1 million. The increase in working capital was offset by decreases of $173.8 million in accounts receivable and $121.8 million in inventories, also primarily due to ~~Consolidated Financial Statements).~~lower prices.

Cash Distributions

Common Units

During ~~2019,~~2020, 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 14, ~~2019~~2020	$	~~17.3~~18.3 million	Fourth quarter ~~2018~~2019
May 15, ~~2019~~2020	$	~~17.7~~13.5 million	First quarter ~~2019~~2020
August 14, ~~2019~~2020	$	~~17.9~~15.7 million	Second quarter ~~2019~~2020

In addition, on October ~~25, 2019,~~26, 2020, the board of directors of our general partner declared a quarterly cash distribution of ~~$0.52~~$0.50 per unit ($~~2.08~~2.00 per unit on an annualized basis) on all of our outstanding common units for the period from July 1, ~~2019~~2020 through September 30, ~~2019~~2020 to our common unitholders of record as of the close of business on November ~~8, 2019.~~ 9, 2020. We expect to pay the total cash distribution of approximately ~~$18.1~~$17.3 million on November ~~14, 2019.~~ 13, 2020.

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Preferred Units

During ~~2019,~~2020, 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 ~~15, 2019~~18, 2020	$	1.7 million	November 15, ~~2018~~2019 - February 14, ~~2019~~2020
May 15, ~~2019~~2020	$	1.7 million	February 15, 2020 - May 14, ~~2019~~2020
August ~~15, 2019~~17, 2020	$	1.7 million	May 15, 2020 - August 14, ~~2019~~2020

In addition, on October ~~22, 2019,~~19, 2020, 2020, 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 our Series A Preferred Units for the period from August 15, ~~2019~~2020 through November 14, ~~2019~~2020 to our preferred unitholders of record as of the opening of business on November ~~1, 2019.~~2, 2020. We expect to pay the total cash distribution of approximately $1.7 million on November ~~15, 2019.~~ 16, 2020.

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Contractual Obligations

We have contractual obligations that are required to be settled in cash. The amounts of our contractual obligations at September 30, ~~2019~~2020 were as follows (in thousands):


			Payments Due by Period
	Remainder of								2024 and
Contractual Obligations	2020		2021		2022		2023		Thereafter		Total
Credit facility obligations (1)	$	5,171	$	162,940	$	195,100	$	—	$	—	$	363,211
Senior notes obligations (2)		10,500		49,000		49,000		338,500		512,000		959,000
Operating lease obligations (3)		20,988		89,385		59,696		45,598		137,081		352,748
Other long-term liabilities (4)		8,722		26,901		22,091		13,259		50,808		121,781
Financing obligations (5)		3,707		15,023		15,268		15,518		97,932		147,448
Total	$	49,088	$	343,249	$	341,155	$	412,875	$	797,821	$	1,944,188

Payments Due by Period

Remainder of

2023 and

Contractual Obligations

2019

2020

2021

2022

Thereafter

Total

Credit facility obligations (1)

$
107,988

$
155,441

$
155,441

$
51,814

$
—

$
470,684

Senior notes obligations (2)

2,625

49,000

49,000

49,000

850,500

1,000,125

Operating lease obligations (3)

22,356

80,824

70,717

51,589

141,076

366,562

Other long-term liabilities (4)

10,567

26,874

24,479

21,067

53,465

136,452

Financing obligations (5)

3,743

15,094

15,426

15,766

121,177

171,206

Total

$
147,279

$
327,233

$
315,063

$
189,236

$
1,166,218

$
2,145,029

(1)

~~(1)~~

Includes principal and interest on our working capital revolving credit facility and our revolving credit facility at September 30, ~~2019~~2020 and assumes a ratable payment through the expiration date. Our credit agreement has a contractual maturity of April 29, 2022 and no principal payments are required prior to that date. However, we repay amounts outstanding and reborrow funds 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.

(2)

~~(2)~~

Includes principal and interest on our senior notes. No principal payments are required prior to maturity. See Note 78 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 for additional information on our ~~7.00%~~ senior ~~notes due~~notes. On October 7, 2020, we issued $350.0 million aggregate principal amount of 2029 Notes and used a portion of the proceeds from the offering to fund the redemption of the 2023 ~~and see~~Notes. See “—~~Liquidity and Capital Resources—~~Senior Notes” for additional ~~information on our 7.00% senior notes due 2027.~~

information.

(3)

~~(3)~~

Includes operating lease obligations related to leases for office space and computer equipment, land, ~~terminals and dedicated storage facilities,~~ gasoline stations, railcars and barges.

(4)

~~(4)~~

Includes amounts related to our 15-year brand fee agreement entered into in 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.

(5)

~~(5)~~

Includes lease rental payments in connection with (i) the acquisition of Capitol related to properties previously sold by Capitol inwithin two sale-leaseback transactions; and (ii) the sale of real property assets at 30 gasoline stations and convenience stores. These 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 98 of Notes to Consolidated Financial Statement for additional information.

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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 ~~$33.3~~$24.8 million and ~~$25.9~~$33.3 million in maintenance capital expenditures for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, which are included in capital expenditures in the accompanying consolidated statements of cash flows, of which approximately ~~$30.8~~$20.0 million and ~~$22.3~~$30.8 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, 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

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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 ~~$19.2~~$14.8 million and ~~$17.6~~$19.2 million in expansion capital expenditures for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, primarily related to investments in our gasoline station business. In addition, for the nine months ended September 30, 2018, expansion capital expenditures also includes approximately $120.1 million in property and equipment associated with the acquisitions of Cheshire and Champlain.

We currently expect maintenance capital expenditures of approximately $45.0 million to $55.0 million and expansion capital expenditures, excluding acquisitions, of approximately ~~$35.0~~$30.0 million to ~~$45.0~~ $40.0 million in ~~2019,~~2020, 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, ~~that~~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,

2019

2018

Net cash provided by (used in) operating activities

$
109,525

$
(45,902)

Net cash used in investing activities

$
(41,140)

$
(203,417)

Net cash (used in) provided by financing activities

$
(70,726)

$
246,912


	Nine Months Ended
	September 30,
	2020		2019
Net cash provided by operating activities	$	250,289	$	109,525
Net cash used in investing activities	$	(34,772)	$	(41,140)
Net cash used in financing activities	$	(222,698)	$	(70,726)

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.

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Net cash provided by ~~(used in)~~ operating activities was ~~$109.5~~$250.3 million and ~~($45.9 million)~~$109.5 million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, for a period-over-period increase in cash flow from operating activities of ~~$155.6~~$140.8 million. For the nine months ended September 30, 2018, cash flow from operating activities was not impacted by the non-cash gain of $52.6 million as a result of the extinguishment of a contingent liability related to the Volumetric Ethanol Excise Tax Credit. This gain was included in

Except for net income, ~~and offset by~~ the ~~corresponding decrease in the liability (see Note 1 of Notes to Consolidated Financial Statements). The~~ primary drivers of the changes in operating activities include the following (in thousands):

Nine Months Ended

Period over

September 30,

Period


2019

2018

Change

(Increase) decrease in accounts receivable

$
(1,492)

$
9,301

$
(10,793)

(Increase) in inventories

$
(7,724)

$
(124,537)

$
116,813

Increase in accounts payable

$
1,389

$
23,118

$
(21,729)

Increase (decrease) in change in derivatives

$
20,606

$
(3,205)

$
23,811


	Nine Months Ended				Period over
	September 30,				Period
	2020		2019		Change
Decrease (increase) in accounts receivable	$	173,424	$	(1,492)	$	174,916
Decrease (increase) in inventories	$	121,462	$	(7,724)	$	129,186
(Decrease) increase in accounts payable	$	(186,592)	$	1,389	$	(187,981)
(Increase) decrease in change in derivatives	$	(44,704)	$	20,606	$	(65,310)

~~Table~~For the nine months ended September 30, 2020, the decreases in accounts receivable, inventories and accounts payable are largely due to the decrease in prices, primarily caused by the COVID-19 pandemic and geopolitical events. The increase in operating cash flow was also impacted by the year-over-year change in derivatives of ~~Contents~~$65.3 million in part due to the decrease in prices and an increase in the volume of physical forward contracts.

For the nine months ended September 30, 2019, the increases in accounts receivable and inventories were primarily due to an increase in prices. ~~The increase~~

Investing Activities

Net cash used in ~~cash flow from operating~~investing activities was ~~also impacted by the year-over-year change in derivatives of $23.8~~$34.8 million ~~due to market direction.~~

~~For~~for the nine months ended September 30, ~~2018,~~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 ~~decrease~~sale of property and equipment. The seller note issuances represent notes we received from buyers in ~~accounts receivable and accounts payable was in part due to~~connection with the ~~change in activity related to the heating season. The increase in inventories was primarily due to an increase in prices but also due to higher inventory volume.~~ sale of certain of our gasoline stations.

~~Investing Activities~~

Net cash used in investing activities was $41.1 million for the nine months ended September 30, 2019 and included $33.3 million in maintenance capital expenditures, $19.2 million in expansion capital expenditures and $0.6 million in seller note issuances, offset by $12.0 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.~~

Net cash used in investing activities was $203.4 million for the nine months ended September 30, 2018 and included cash used to fund the acquisitions of Cheshire and Champlain in the preliminary amounts of $138.4 million and $33.4 million, respectively, $25.9 million in maintenance capital expenditures, $17.6 million in expansion capital expenditures and $3.0 million in seller note issuances, offset by $14.9 million in proceeds from the sale of property and equipment.

Please read “—Capital Expenditures” for a discussion of our capital expenditures for the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019.

Financing Activities

Net cash used in financing activities was $222.7 million for the nine months ended September 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 at Basin 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 at Basin Transload.

Net cash used in financing activities was $70.7 million for the nine months ended September 30, 2019 and included $381.9 million in payments in connection with the repurchase of the 6.25% senior notes due 2022 ~~Notes~~ and the issuance of the 7.00% senior notes due 2027, ~~Notes,~~ $57.4 million in cash distributions to our limited partners (preferred and common unitholders) and our general partner, $23.0 million in net payments on our revolving credit facility, $0.6 million in LTIP units withheld for tax obligations related to awards that vested in 2019 and $0.4 million in net payments on our

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working capital revolving credit facility. Net cash used in financing activities was offset by $392.6 million in proceeds in connection with the issuance of the ~~2027 Notes.~~ 7.00% senior notes due 2027.

Net cash provided by financing activities was $246.9 million for the nine months ended September 30, 2018 and included $181.0 million in net borrowing from our revolving credit facility, $66.4 million in net proceeds from the issuance of the SeriesA Preferred Units and $48.2 million in borrowings from our working capital revolving credit facility, offset by $47.8 million in cash distributions to our common unitholders and our general partner and $0.8 million in LTIP units withheld for tax obligations related to awards that vested in 2018.

See Note 98 of Notes to Consolidated Financial ~~Statement~~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 ~~$1.3~~$1.17 billion senior secured credit ~~facility.~~ facility which was amended on May 7, 2020 to, among other things, provide temporary adjustments to certain covenants and reduce the total aggregate commitment by $130.0 million from $1.3 billion (see “–Fourth Amendment to the Credit Agreement” below).

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. ~~On April 19, 2019, we entered into the third amendment to third amended and restated~~The credit agreement ~~which, among other things, extended the maturity date to~~matures on April 29, 2022 from April 30, 2020 and reduced by 0.25% the applicable rate under the revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit.

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All other material terms of the credit agreement remain substantially the same as disclosed in Note 7 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2018.2022.

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 ~~$850.0~~$770.0 million; and

●

a ~~$450.0~~$400.0 million revolving credit facility to be used for general corporate 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~~credit agreement were 2.8% and 4.3% for ~~each of~~ the three months ended September 30, 2020 and 2019, respectively, and ~~2018~~3.0% and 4.5% ~~and 4.1%~~ for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively.

As of September 30, ~~2019,~~2020, we had total borrowings outstanding under the ~~Credit Agreement~~credit agreement of ~~$449.9~~$348.1 million, including ~~$197.0~~ $188.0 million outstanding on the revolving credit facility. In addition, we had outstanding letters of credit of ~~$68.7~~$48.5 million. Subject to borrowing base limitations, the total remaining availability for borrowings and letters of credit was ~~$781.4~~$773.4 million and ~~$770.7~~$660.2 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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 at ~~September30, 2019.~~September 30, 2020. 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 ended December 31, ~~2018~~2019 for additional information on the credit agreement.

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Fourth Amendment to the Credit Agreement

~~Senior Notes~~

On May 7, 2020, we and certain of our subsidiaries entered into the Fourth Amendment to Third Amended and Restated Credit Agreement (the “Fourth 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.

~~We had 7.00% senior notes due 2027 (discussed below)~~

The Fourth Amendment amends certain terms, provisions and ~~7.00% senior notes due 2023 outstanding at September 30, 2019. Please read~~covenants of the credit agreement, including, without limitation:

(i)

(ii)

adds two pricing levels under the revolving credit facility for borrowings of base rate loans, Eurocurrency rate loans and cost of funds rate loans and for issuances of letters of credit;

(iii)

adds a Eurocurrency rate floor of 0.75% and a cost of funds rate floor of 0.50%;

(iv)

(v)

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, ~~2018~~2019.

Senior Notes

We had 7.00% senior notes due 2027 and 7.00% senior notes due 2023 outstanding at September 30, 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, 2019 for additional information on ~~the 7.00%~~these senior ~~notes due 2023.~~

~~7.00% Senior Notes Due 2027~~

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As a result of the repurchase of the 2022 Notes, we recorded a $13.1 million loss from early extinguishment of debt for each of the three and nine months ended September 30, 2019, consisting of a $6.9 million cash call premium and a $6.2 million non-cash write-off of remaining unamortized original issue discount and deferred financing fees.

~~2027 Note Indenture~~

The ~~2027~~2029 Notes ~~will~~ mature on ~~August 1, 2027~~January 15, 2029 with interest accruing at a rate of ~~7.00%~~6.875% per ~~annum~~annum. Interest is payable beginning July 15, 2021 and ~~payable~~thereafter semi-annually in arrears on ~~August 1~~January 15 and ~~February 1~~July 15 of each ~~year, commencing February 1, 2020.~~year. The ~~2027~~2029 Notes are guaranteed on a joint and several senior unsecured basis by each of the Issuers and the subsidiary guarantors to the extent set forth in the ~~2027~~2029 Notes Indenture. Upon a continuing event of default, the trustee or the holders of at least 25% in principal amount of the ~~2027~~2029 Notes may declare the ~~2027~~2029 Notes immediately due and payable, except that an event of default resulting from entry into a bankruptcy, insolvency or reorganization with respect to the Issuers, any restricted subsidiary of ours that is a significant subsidiary or any group of our restricted subsidiaries that, taken together, would constitute a significant subsidiary of ours, will automatically cause the ~~2027~~2029 Notes to become due and payable.

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The ~~2027~~2029 Notes Indenture contains covenants that ~~will~~ limit our ability to, among other things, incur additional indebtedness and issue preferred securities, make certain dividends and distributions, make certain investments and other restricted payments, restrict distributions by our subsidiaries, create liens, ~~enter into sale-leaseback transactions,~~ sell assets or merge with other entities. Events of default under the ~~2027~~2029 Notes Indenture include (i) a default in payment of principal of, or interest or premium, if any, on, the ~~2027~~2029 Notes, (ii) breach of our covenants under the ~~2027~~2029 Notes Indenture, (iii) certain events of bankruptcy and insolvency, (iv) any payment default or acceleration of indebtedness of ours or certain subsidiaries if the total amount of such indebtedness unpaid or accelerated exceeds $50.0 million and (v) failure to pay within 60 days uninsured final judgments exceeding $50.0 million.

~~2027~~2029 Notes Registration Rights Agreement

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~~September 23, 2020,~~ December 1, 2021, the annual interest rate borne by the ~~2027~~2029 Notes will ~~be increased~~increase by 1.0% per annum until the exchange offer is completed or ~~the~~a shelf registration statement relating to the resales of the 2029 Notes is declared ~~effective (or automatically becomes effective).~~effective.

Financing Obligations

Capitol Acquisition

On June 1, 2015, we acquired retail gasoline stations and dealer supply contracts from Capitol Petroleum Group (“Capitol”). In connection with the acquisition, we assumed a financing obligation of $89.6 million associated with two sale-leaseback transactions by Capitol for 53 leased sites that did not meet the criteria for sale accounting. During the terms of these leases, which expire in May 2028 and September 2029, in lieu of recognizing lease expense for the lease rental payments, we incur interest expense associated with the financing obligation. Interest expense of approximately $2.3 million was recorded for each of the three months ended September 30, ~~2019~~2020 and ~~2018,~~2019, and $7.0 million was recorded for each of the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, which is included in interest expense in the accompanying consolidated statements of operations. The financing obligation will amortize through expiration of the leases based upon the lease rental payments which were $2.5 million ~~and $2.4 million~~ for each of the three months ended September 30, 2020 and 2019, and ~~2018, respectively,~~$7.6 million and $7.4 ~~million and $7.2~~ million for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The financing obligation balance outstanding at September 30, ~~2019~~2020 was ~~$87.1~~$86.4 million associated with the Capitol acquisition.

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Sale-Leaseback Transaction

On June 29, 2016, we sold to a premier institutional real estate investor (the “Buyer”)real property assets, including the buildings, improvements and appurtenances thereto, at 30 gasoline stations and convenience stores located in Connecticut, Maine, Massachusetts, New Hampshire and Rhode Island ~~(the~~(the “Sale-Leaseback Sites”) for a purchase price of approximately $63.5 million. In connection with the sale, we entered into a Master Unitary Lease Agreement with the Buyer to lease back the real property assets sold with respect to the Sale-Leaseback Sites (such Master Lease Agreement, together with the Sale-Leaseback Sites, the “Sale-Leaseback Transaction”).

As a result of not meeting the criteria for sale accounting for these sites, the Sale-Leaseback Transaction is accounted for as a financing arrangement. As such, the property and equipment sold and leased back by us has not been derecognized and continues to be depreciated. We recognized a corresponding financing obligation of $62.5 million equal to the $63.5 million cash proceeds received for the sale of these sites, net of $1.0 million financing fees. During the term of the lease, which expires in June 2031, in lieu of recognizing lease expense for the lease rental payments, we incur interest expense associated with the financing obligation. Lease rental payments are recognized as both interest expense and a reduction of the principal balance associated with the financing obligation. Lease rental payments are recognized as both interest expense and a reduction of the principal balance associated with the financing obligation. Interest expense was $1.1 million for each of the three months ended September 30, ~~2019~~2020 and ~~2018~~2019 and $3.3 million for each of the nine months ended September 30, ~~2019~~2020 and ~~2018.~~2019. Lease rental payments were $1.2 million ~~and $1.1 million~~ for each of the three months ended September 30, ~~2019~~2020 and ~~2018, respectively,~~2019, and $3.5 million ~~and $3.3 million~~ for each of the nine months ended September 30, ~~2019~~2020 and ~~2018, respectively.~~2019. The financing obligation balance outstanding at September 30, ~~2019~~2020 was ~~$62.4~~$62.1 million associated with the Sale-Leaseback Transaction.

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 outbreak of COVID-19 across the United States and the responses of governmental bodies (federal, state and municipal), companies and individuals, including mandated and/or voluntary restrictions to mitigate the spread of the virus, have caused a significant economic downturn. The uncertainty surrounding the short and long-term impact of COVID-19, including the inability to project the timing of an economic recovery, may have an impact on our use of estimates.Actual results may differ from these estimates under different assumptions or conditions.

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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 ended December 31, ~~2018.~~2019. 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, except as described in Note 219 of Notes to Consolidated Financial Statements herein for the adoption of ASU ~~2016-02, “Leases,~~2016-13, “Measurement of Credit Losses on

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Financial Instruments,” including modifications to that standard thereafter, and now codified as ASC ~~842~~326 which we adopted on January 1, ~~2019.~~2020.

Recent Accounting Pronouncements

A description and related impact expected from the adoption of certain new accounting pronouncements is provided in Note 2119 of Notes to Consolidated Financial Statements included elsewhere in this report.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which we are exposed are interest rate risk and commodity risk. We currently utilize various derivative instruments to manage exposure to commodity risk.

Interest Rate Risk

We utilize variable rate debt and are exposed to market risk due to the floating interest rates on our credit agreement. Therefore, from time to time, we utilize interest rate collars, swaps and caps to hedge interest obligations on specific and anticipated debt issuances.

As of September 30, ~~2019,~~2020, we had total borrowings outstanding under our credit agreement of ~~$449.9~~ $348.1 million. Please read Part I, Item 2. “Management’s Discussion and Analysis—Liquidity and Capital Resources—Credit Agreement,” for information on interest rates related to our borrowings. The impact of a 1% increase in the interest rate on this amount of debt would have resulted in an increase in interest expense, and a corresponding decrease in our results of operations, of approximately ~~$4.5~~$3.5 million annually, assuming, however, that our indebtedness remained constant throughout the year.

Commodity Risk

We hedge our exposure to price fluctuations with respect to refined petroleum products, renewable fuels, crude oil and gasoline blendstocks in storage and expected purchases and sales of these commodities. The derivative instruments utilized consist primarily of exchange-traded futures contracts traded on the NYMEX, CME and ICE and over-the-counter transactions, including swap agreements entered into with established financial institutions and other credit-approved energy companies. Our policy is generally to purchase only products for which we have a market and to structure our sales contracts so that price fluctuations do not materially affect our profit. While our policies are designed to minimize market risk, as well as inherent basis risk, exposure to fluctuations in market conditions remains. Except for the controlled trading program discussed below, we do not acquire and hold futures contracts or other derivative products for the purpose of speculating on price changes that might expose us to indeterminable losses.

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While we seek to maintain a position that is substantially balanced within our commodity product purchase and sales activities, we may experience net unbalanced positions for short periods of time as a result of variances in daily purchases and sales and transportation and delivery schedules as well as other logistical issues inherent in our businesses, such as weather conditions. In connection with managing these positions, we are aided by maintaining a constant presence in the marketplace. We also engage in a controlled trading program for up to an aggregate of 250,000 barrels of commodity products at any one point in time. Changes in the fair value of these derivative instruments are recognized in the consolidated statements of operations through cost of sales. In addition, because a portion of our crude oil business may be conducted in Canadian dollars, we may use foreign currency derivatives to minimize the risks of unfavorable exchange rates. These instruments may include foreign currency exchange contracts and forwards. In conjunction with entering into the commodity derivative, we may enter into a foreign currency derivative to hedge the resulting foreign currency risk. These foreign currency derivatives are generally short-term in nature and not designated for hedge accounting.

We utilize exchange-traded futures contracts and other derivative instruments to minimize or hedge the impact of commodity price changes on our inventories, fuel purchases and forward fixed price commitments. Any hedge

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ineffectiveness is reflected in our results of operations. We utilize regulated exchanges, including the NYMEX, CME and ICE, which are exchanges for the respective commodities that each trades, thereby reducing potential delivery and supply risks. Generally, our practice is to close all exchange positions rather than to make or receive physical deliveries. With respect to other products such as ethanol, which may not have a correlated exchange contract, we enter into derivative agreements with counterparties that we believe have a strong credit profile, in order to hedge market fluctuations and/or lock-in margins relative to our commitments.

At September 30, ~~2019,~~2020, the fair value of all of our commodity risk derivative instruments and the change in fair value that would be expected from a 10% price increase or decrease are shown in the table below (in thousands):


	Fair Value at		Gain (Loss)
	September 30,		Effect of 10%		Effect of 10%
	2019		Price Increase		Price Decrease

							Fair Value at		Gain (Loss)
							September 30,		Effect of 10%		Effect of 10%
							2020		Price Increase		Price Decrease
Exchange traded derivative contracts	$	33,493	$	(31,686)	$	31,686	$	(5,115)	$	(20,145)	$	20,145
Forward derivative contracts		1,289		(3,217)		3,217		36,570		(5,670)		5,670
Total	$	34,782	$	(34,903)	$	34,903	$	31,455	$	(25,815)	$	25,815

The fair values of the futures contracts are based on quoted market prices obtained from the NYMEX, CME and ICE. The fair value of the swaps and option contracts are estimated based on quoted prices from various sources such as independent reporting services, industry publications and brokers. These quotes are compared to the contract price of the swap, which approximates the gain or loss that would have been realized if the contracts had been closed out at September 30, ~~2019.~~2020. For positions where independent quotations are not available, an estimate is provided, or the prevailing market price at which the positions could be liquidated is used. All hedge positions offset physical exposures to the physical market; none of these offsetting physical exposures are included in the above table. Price-risk sensitivities were calculated by assuming an across-the-board 10% increase or decrease in price regardless of term or historical relationships between the contractual price of the instruments and the underlying commodity price. In the event of an actual 10% change in prompt month prices, the fair value of our derivative portfolio would typically change less than that shown in the table due to lower volatility in out-month prices. We have a daily margin requirement to maintain a cash deposit with our brokers based on the prior day’s market results on open futures contracts. The balance of this deposit will fluctuate based on our open market positions and the commodity exchange’s requirements. The brokerage margin balance was ~~$24.7~~$23.5 million at September 30, ~~2019.~~2020.

We are exposed to credit loss in the event of nonperformance by counterparties to our exchange-traded derivative contracts, physical forward contracts, and swap agreements. We anticipate some nonperformance by some of these counterparties which, in the aggregate, we do not believe at this time will have a material adverse effect on our financial condition, results of operations or cash available for distribution to our unitholders. Exchange-traded derivative contracts, the primary derivative instrument utilized by us, are traded on regulated exchanges, greatly reducing potential credit risks. We utilize major financial institutions as our clearing brokers for all NYMEX, CME and ICE derivative transactions and the right of offset exists with these financial institutions. Accordingly, the fair value of our ~~exchange-~~

~~Table of Contents~~

~~traded~~exchange-traded derivative instruments is presented on a net basis in the consolidated balance sheet. Exposure on physical forward contracts and swap agreements is limited to the amount of the recorded fair value as of the balance sheet dates.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our principal executive officer and principal financial officer, management evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were operating and effective as of September 30, ~~2019.~~2020.

Table of Contents

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II. OTHER INFORMATION

Item 1.Legal Proceedings

~~Item 1.Legal Proceedings~~

The information required by this item is included in Note 2018 of Notes to Consolidated Financial Statements and is incorporated herein by reference.

Item 1A.Risk Factors

~~Item 1A.Risk Factors~~

In addition to other information set forth in this report, you should carefully consider the factors discussed below and in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially affect our business, financial condition or future results.

The outbreak of COVID-19 and certain developments in global oil markets have 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 operation and those of our customers, suppliers and other counterparties.

The outbreak of COVID-19 across the United States and the responses of governmental bodies (federal, state and municipal), companies and individuals, including mandated and/or voluntary restrictions to mitigate the spread of the virus, have caused a significant economic downturn. Because there are fewer people commuting to and from work and elsewhere, fewer people traveling, fewer people on the road to purchase goods or services, and fewer companies engaged in their traditional business activities who would otherwise seek such goods and/or services, there has been a decline in the demand for the products we sell and the services we provide. These declines are further impacted by world-wide events related to production of crude oil and the related steep decline in the pricing of that product.

There is continuing uncertainty surrounding the short-term and long-term impacts of COVID-19 to the national and state economies. The inability to project a timely economic recovery and/or the extent of same on each of a national, state and regional basis remain prevalent. Any prolonged period of economic distress and/or prolonged and disparate periods of economic recovery have had and could continue to have an adverse effect on our financial condition, results of operation and cash available for distribution to our unitholders. These events could also have or cause significant adverse effects on the financial condition of our counterparties, suppliers of goods and services we purchase, and purchasers of customers of the goods and services we sell, resulting in disruption to and a decline in our business activities resulting in an adverse impact to our financial condition and results of operations.

Any of the foregoing events or conditions, or other unforeseen consequences of COVID-19 and certain developments in global oil markets, could significantly adversely affect our business and financial condition and the business and financial condition of our customers, suppliers and counterparties. The ultimate extent of the impact of COVID-19 on our business, financial condition and results of operations depends in large part on future developments which are uncertain and cannot be predicted with any certainty at this time. That uncertainty includes the duration of the COVID-19 pandemic, the geographic regions so impacted, the extent of such impact within specific boundaries of those areas and the impact to the local, state and national economies.

To the extent COVID-19 and certain developments in global oil markets adversely affect our business activities, financial condition and results of operations, the COVID-19 pandemic and such developments in global oil markets may also have the effect of heightening many of the other risk factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2018, which, as updated below, could materially affect our business, financial condition or future results.~~2019.

~~Tax Risks~~

~~The tax treatment~~Table of publicly traded partnerships or an investment in our units generally could be negatively impacted by future legislative, judicial or administrative changes in applicable tax laws or differing interpretations thereof, possibly applied on a retroactive basis.Contents

The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our units, may be negatively impacted by future administrative, legislative or judicial changes or differing interpretations thereof at any time. For example, from time to time, members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including elimination of partnership tax treatment for publicly traded partnerships. For example, the “Clean Energy for America Act”, which is similar to legislation that was commonly proposed during the Obama Administration, was introduced in the Senate on May 2, 2019. If enacted, this proposal would, among other things, repeal Section 7704(d)(1)(E) of the Internal Revenue Code upon which we rely for our treatment as a partnership for U.S. federal income tax purposes. In addition, the Treasury Department has issued, and in the future may issue, regulations interpreting those laws that affect publicly traded partnerships. There can be no assurance that there will not be further changes to U.S. federal income tax laws or the Treasury Department’s interpretation of such laws in a manner that could impact our ability to qualify as a publicly traded partnership in the future. Any modification to the U.S. federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for U.S. federal income tax purposes. We are unable to predict whether any changes or other proposals will ultimately be enacted.

In addition, there can be no assurance that there will not be any legislative, judicial or administrative changes in tax law generally that would negatively impact the value of an investment in our units. You are urged to consult with your own tax advisor with respect to the status of legislative, regulatory and administrative developments and proposals in tax law generally and their potential effect on your investment in our units.

Item 6.Exhibits

~~Item 6.Exhibits~~

(a)

Exhibits


3.1	~~(a)~~		~~Exhibits~~


~~3.1~~	—		Certificate of Limited Partnership of Global Partners LP (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 filed on May 10, 2005).

3.2		—		Fourth Amended and Restated Agreement of Limited Partnership of Global Partners LP dated as of August 7, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 7, 2018).

4.1		—		Indenture, dated as of June 24, 2014, among the Issuers, the Guarantors, and Deutsche Bank Trust Company Americas, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on June 25, 2014).

~~Table of Contents~~


~~4.2~~	—		Indenture, dated as of June 4, 2015, among the Issuers, the Guarantors, and Deutsche Bank Trust Company Americas, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on June 4, 2015).

~~4.3~~	—		Indenture, dated July 31, 2019, among the Issuers, the Guarantors and Deutsche Bank Trust Company Americas, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on July 31, 2019).

~~4.4~~ 4.2		—		Indenture, dated October 7, 2020, among the Issuers, the Guarantors and Regions Bank, as trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on October 8, 2020).

4.3		—		Registration Rights Agreement, dated ~~July 31, 2019,~~October 7, 2020, among the Issuers, the Guarantors and the Initial Purchasers (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on ~~July 31, 2019)~~October 8, 2020).

10.1		—		Purchase Agreement, dated ~~July 24, 2019,~~September 23, 2020, among the Issuers, the Guarantors and the Initial Purchasers (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on ~~July 25, 2019)~~September 24, 2020).

10.2*^††		—		Brand Fee Agreement, dated September 3, 2010, between ExxonMobil Oil Corporation and Global ~~Partners LP 2018 Long-Term Cash Incentive Plan Award Agreement~~Companies LLC.

31.1*		—		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer of Global GP LLC, general partner of Global Partners LP.

31.2*		—		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer of Global GP LLC, general partner of Global Partners LP.

32.1†		—		Section 1350 Certification of Chief Executive Officer of Global GP LLC, general partner of Global Partners LP.

32.2†		—		Section 1350 Certification of Chief Financial Officer of Global GP LLC, general partner of Global Partners LP.

101.INS*		—		Inline XBRL Instance ~~Document.~~Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*		—		Inline XBRL Taxonomy Extension Schema Document.
101.CAL*		—		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*		—		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*		—		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
101.PRE101.DEF		—		Inline XBRL Taxonomy Extension Definition Linkbase Document.
104*		—		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

~~^ Management contract or compensatory plan or arrangement.~~

† Not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section.

†† Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

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SIGNATURES

~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


				GLOBAL PARTNERS LP
	~~GLOBAL PARTNERS LP~~
	By:	Global GP LLC,
		its general partner


Dated: November ~~7, 2019~~5, 2020		By:	/s/ Eric Slifka
			Eric Slifka
			President and Chief Executive Officer
			(Principal Executive Officer)


Dated: November ~~7, 2019~~5, 2020		By:	/s/ Daphne H. Foster
			Daphne H. Foster
			Chief Financial Officer
			(Principal Financial Officer)

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2019~~2020

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Delaware		74-3140887
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units representing limited partner interests	GLP	New York Stock Exchange

9.75% Series A Fixed-to-Floating Cumulative Redeemable	GLP pr A	New York Stock Exchange
Perpetual Preferred Units representing limited partner interests


Large accelerated filer ☐			Accelerated filer ☒
Non-accelerated filer ☐			Smaller reporting company ☐
			Emerging growth company ☐


~~Title of class~~	~~Trading Symbol(s)~~	~~Name of exchange on which registered~~
~~Common Units representing limited partner interests~~	~~GLP~~	~~New York Stock Exchange~~

~~9.75% Series A Fixed-to-Floating Cumulative Redeemable~~	~~GLP pr A~~	~~New York Stock Exchange~~
~~Perpetual Preferred Units representing limited partner interests~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)		3

Consolidated Balance Sheets as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019		3

Consolidated Statements of Operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019		4

Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019		5

Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019		6

Consolidated Statements of Partners’ Equity for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019		7

Notes to Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		54 52

Item 3. Quantitative and Qualitative Disclosures About Market Risk		80

Item 4. Controls and Procedures		82 81

PART II. OTHER INFORMATION		83

Item 1. Legal Proceedings		83

Item 1A. Risk Factors		83

Item 6. Exhibits		83 84

SIGNATURES		85


	Partners' Equity
	Series A						Accumulated
	Preferred		Common		General		Other				Total
	Limited		Limited		Partner		Comprehensive		Noncontrolling		Partners’
Three and nine months ended September 30, 2020	Partners		Partners		Interest		Loss		Interest		Equity
Balance at December 31, 2019	$	67,226	$	398,535	$	(2,620)	$	(5,076)	$	1,174	$	459,239
Net income (loss)		1,682		1,572		22		—		(201)		3,075
Noncontrolling interest capital contribution		—		—		—		—		400		400
Distributions to limited partners and general partner		(1,682)		(17,848)		(443)		—		—		(19,973)
Unit-based compensation		—		288		—		—		—		288
Other comprehensive income		—		—		—		(2,980)		—		(2,980)
LTIP units withheld for tax obligations		—		(25)		—		—		—		(25)
Dividends on repurchased units		—		68		—		—		—		68
Balance at March 31, 2020	$	67,226	$	382,590	$	(3,041)	$	(8,056)	$	1,373	$	440,092
Net income (loss)		1,682		74,069		511		—		(289)		75,973
Distributions to limited partners and general partner		(1,682)		(13,385)		(91)		—		—		(15,158)
Unit-based compensation		—		299		—		—		—		299
Other comprehensive income		—		—		—		7,547		—		7,547
Repurchase of common units		—		(291)		—		—		—		(291)
LTIP units withheld for tax obligations		—		(5)		—		—		—		(5)
Dividends on repurchased units		—		49		—		—		—		49
Balance at June 30, 2020	$	67,226	$	443,326	$	(2,621)	$	(509)	$	1,084	$	508,506
Net income (loss)		1,682		16,224		324		—		(38)		18,192
Acquisition of noncontrolling interest		—		(604)		—		—		(1,046)		(1,650)
Distributions to limited partners and general partner		(1,682)		(15,595)		(106)		—		—		(17,383)
Unit-based compensation		—		224		—		—		—		224
Other comprehensive income		—		—		—		1,406		—		1,406
LTIP units withheld for tax obligations		—		(243)		—		—		—		(243)
Dividends on repurchased units		—		13		—		—		—		13
Balance at September 30, 2020	$	67,226	$	443,345	$	(2,403)	$	897	$	—	$	509,065


	Partners' Equity
	Series A						Accumulated
	Preferred		Common		General		Other				Total
	Limited		Limited		Partner		Comprehensive		Noncontrolling		Partners’
For the three and nine months ended September 30, 2019	Partners		Partners		Interest		Loss		Interest		Equity
Balance at December 31, 2018	$	67,226	$	437,874	$	(2,509)	$	(5,260)	$	1,863	$	499,194
Net income (loss)		1,682		5,140		304		—		(332)		6,794
Distributions to limited partners and general partner		(1,682)		(16,998)		(317)		—		—		(18,997)
Unit-based compensation		—		795		—		—		—		795
Other comprehensive income		—		—		—		1,744		—		1,744
LTIP units withheld for tax obligations		—		(8)		—		—		—		(8)
Balance at March 31, 2019	$	67,226	$	426,803	$	(2,522)	$	(3,516)	$	1,531	$	489,522
Net income (loss)		1,682		12,441		366		—		(118)		14,371
Distributions to limited partners and general partner		(1,682)		(17,338)		(373)		—		—		(19,393)
Unit-based compensation		—		795		—		—		—		795
Other comprehensive income		—		—		—		736		—		736
LTIP units withheld for tax obligations		—		(24)		—		—		—		(24)
Balance at June 30, 2019	$	67,226	$	422,677	$	(2,529)	$	(2,780)	$	1,413	$	486,007
Net income (loss)		1,682		13,003		395		—		(187)		14,893
Distributions to limited partners and general partner		(1,682)		(17,508)		(387)		—		—		(19,577)
Unit-based compensation		—		76		—		—		—		76
Other comprehensive income		—		—		—		391		—		391
LTIP units withheld for tax obligations		—		(614)		—		—		—		(614)
Dividends on repurchased units		—		571		—		—		—		571
Balance at September 30, 2019	$	67,226	$	418,205	$	(2,521)	$	(2,389)	$	1,226	$	481,747


~~Gasoline station and convenience store leases~~	~~1-20~~	~~years~~
~~Terminal lease arrangements~~	~~1-7~~	~~years~~
~~Dedicated storage facility leases~~	~~1-5~~	~~years~~
~~Barge and railcar equipment leases~~	~~1-10~~	~~years~~
~~Office space leases~~	~~1-12~~	~~years~~
~~Computer equipment, convenience store equipment and automobile leases~~	~~1-6~~	~~years~~


Remainder of 2019	$	21,743
2020		81,295
2021		72,817
2022		53,824
2023		42,695
Thereafter		111,847
Total lease payments		384,221
Less imputed interest		75,294
Total lease liabilities	$	308,927
Current portion	$	65,273
Long-term portion		243,654
Total lease liabilities	$	308,927


Remainder of 2019	$	16,176
2020		49,136
2021		29,222
2022		12,986
2023		4,163
Thereafter		10,633
Total	$	122,316


	Three Months Ended September 30, 2019

									Three Months Ended September 30, 2020
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total		Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels, crude oil and propane	$	303,525	$	1,010,655	$	189,941	$	1,504,121	$	262,068	$	696,184	$	109,963	$	1,068,215
Station operations		—		110,877		—		110,877		—		104,710		—		104,710
Total revenue from contracts with customers		303,525		1,121,532		189,941		1,614,998		262,068		800,894		109,963		1,172,925
Other sales:
Revenue originating as physical forward contracts and exchanges		1,488,245		—		123,824		1,612,069		797,775		—		71,964		869,739
Revenue from leases		521		18,065		—		18,586		572		18,146		—		18,718
Total other sales		1,488,766		18,065		123,824		1,630,655		798,347		18,146		71,964		888,457
Total sales	$	1,792,291	$	1,139,597	$	313,765	$	3,245,653	$	1,060,415	$	819,040	$	181,927	$	2,061,382


	Nine Months Ended September 30, 2020
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels, crude oil and propane	$	900,529	$	1,896,960	$	335,589	$	3,133,078
Station operations		—		272,579		—		272,579
Total revenue from contracts with customers		900,529		2,169,539		335,589		3,405,657
Other sales:
Revenue originating as physical forward contracts and exchanges		2,423,073		—		242,674		2,665,747
Revenue from leases		1,650		52,998		—		54,648
Total other sales		2,424,723		52,998		242,674		2,720,395
Total sales	$	3,325,252	$	2,222,537	$	578,263	$	6,126,052


	Nine Months Ended September 30, 2019
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels, crude oil and propane	$	1,187,004	$	2,866,496	$	580,100	$	4,633,600
Station operations		—		300,393		—		300,393
Total revenue from contracts with customers		1,187,004		3,166,889		580,100		4,933,993
Other sales:
Revenue originating as physical forward contracts and exchanges		4,317,457		—		426,071		4,743,528
Revenue from leases		1,564		53,734		—		55,298
Total other sales		4,319,021		53,734		426,071		4,798,826
Total sales	$	5,506,025	$	3,220,623	$	1,006,171	$	9,732,819


	Nine Months Ended September 30, 2018
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels, crude oil and propane	$	1,091,627	$	3,088,906	$	574,588	$	4,755,121
Station operations		—		259,373		—		259,373
Total revenue from contracts with customers		1,091,627		3,348,279		574,588		5,014,494
Other sales:
Revenue originating as physical forward contracts and exchanges		3,968,816		—		360,401		4,329,217
Revenue from leases		1,508		53,082		—		54,590
Total other sales		3,970,324		53,082		360,401		4,383,807
Total sales	$	5,061,951	$	3,401,361	$	934,989	$	9,398,301


	Per Unit Cash		Distribution Declared for the
Cash Distribution Declaration Date	Distribution Declared		Quarterly Period Ended
April 29, 2019	$	0.5100	March 31, 2019
July 26, 2019	$	0.5150	June 30, 2019
October 25, 2019	$	0.5200	September 30, 2019


	Fair Value at December 31, 2018
							Cash Collateral
	Level 1		Level 2		Level 3		Netting		Total
Assets:
Forward derivative contracts (1)	$	—	$	25,504	$	886	$	—	$	26,390
Exchange-traded/cleared derivative instruments (2)		83,617		—		—		(68,851)		14,766
Pension plans		15,800		—		—		—		15,800
Total assets	$	99,417	$	25,504	$	886	$	(68,851)	$	56,956

Liabilities:
Forward derivative contracts (1)	$	—	$	(3,878)	$	(616)	$	—	$	(4,494)


	Earned for the	Per Unit
Cash Distribution	Quarter	Cash		Common		General		Incentive		Total Cash
Payment Date	Ended	Distribution		Units		Partner		Distribution		Distribution
2/14/2019	12/31/18	$	0.5000	$	16,998	$	115	$	202	$	17,315
5/15/2019	03/31/19		0.5100		17,338		117		256		17,711
8/14/2019	06/30/19		0.5150		17,508		118		269		17,895


Assets purchased:
Inventory	$	5,450
Prepaid expenses and other current assets		270
Property and equipment		112,871
Intangibles		12,936
Total identifiable assets purchased		131,527
Liabilities assumed:
Accrued expenses and other current liabilities		(131)
Environmental liabilities		(10,757)
Other non-current liabilities		(938)
Total liabilities assumed		(11,826)
Net identifiable assets acquired		119,701
Goodwill		18,478
Net assets acquired	$	138,179


	Pension
Three Months Ended September 30, 2019	Plan		Derivatives		Total
Balance at June 30, 2019	$	(2,778)	$	(2)	$	(2,780)
Other comprehensive income before reclassifications of gain (loss)		315		—		315
Amount of (loss) gain reclassified from accumulated other comprehensive income		76		—		76
Total comprehensive income		391		—		391
Balance at September 30, 2019	$	(2,387)	$	(2)	$	(2,389)

	Pension
Nine Months Ended September 30, 2019	Pension Plan		Derivatives		Total
Balance at December 31, 2018	$	(5,258)	$	(2)	$	(5,260)
Other comprehensive income before reclassifications of gain (loss)		2,735		—		2,735
Amount of (loss) gain reclassified from accumulated other comprehensive income		136		—		136
Total comprehensive income		2,871		—		2,871
Balance at September 30, 2019	$	(2,387)	$	(2)	$	(2,389)


	Payments Due by Period
	Remainder of								2023 and
Contractual Obligations	2019		2020		2021		2022		Thereafter		Total
Credit facility obligations (1)	$	107,988	$	155,441	$	155,441	$	51,814	$	—	$	470,684
Senior notes obligations (2)		2,625		49,000		49,000		49,000		850,500		1,000,125
Operating lease obligations (3)		22,356		80,824		70,717		51,589		141,076		366,562
Other long-term liabilities (4)		10,567		26,874		24,479		21,067		53,465		136,452
Financing obligations (5)		3,743		15,094		15,426		15,766		121,177		171,206
Total	$	147,279	$	327,233	$	315,063	$	189,236	$	1,166,218	$	2,145,029


	Nine Months Ended				Period over
	September 30,				Period
	2019		2018		Change
(Increase) decrease in accounts receivable	$	(1,492)	$	9,301	$	(10,793)
(Increase) in inventories	$	(7,724)	$	(124,537)	$	116,813
Increase in accounts payable	$	1,389	$	23,118	$	(21,729)
Increase (decrease) in change in derivatives	$	20,606	$	(3,205)	$	23,811