GLOBAL PARTNERS LP - Quarter Report: 2022 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(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, 2022

OR

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

For the transition period from to

Commission file number 001-32593

Global Partners LP

(Exact name of registrant as specified in its charter)

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

P.O. Box 9161
800 South Street
Waltham, Massachusetts 02454-9161
(Address of principal executive offices, including zip code)

(781) 894-8800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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 Rate Cumulative Redeemable	GLP pr A	New York Stock Exchange
Perpetual Preferred Units representing limited partner interests

9.50% Series B Fixed Rate Cumulative Redeemable	GLP pr B	New York Stock Exchange
Perpetual Preferred Units representing limited partner interests

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The issuer had 33,995,563 common units outstanding as of November 2, 2022.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)		3

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021		3

Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021		4

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021		5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021		6

Consolidated Statements of Partners’ Equity for the nine months ended September 30, 2022 and 2021		7

Notes to Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

Item 3. Quantitative and Qualitative Disclosures About Market Risk		61

Item 4. Controls and Procedures		63

PART II. OTHER INFORMATION		64

Item 1. Legal Proceedings		64

Item 1A. Risk Factors		64

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		64

Item 6. Exhibits		64

SIGNATURES		66

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Item 1.Financial Statements

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)


	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	15,486	$	10,849
Accounts receivable, net		430,081		411,194
Accounts receivable—affiliates		3,470		1,139
Inventories		427,731		509,517
Brokerage margin deposits		28,581		33,658
Derivative assets		21,758		11,652
Prepaid expenses and other current assets		73,994		87,076
Total current assets		1,001,101		1,065,085
Property and equipment, net		1,217,006		1,099,348
Right of use assets, net		287,691		280,284
Intangible assets, net		28,972		26,014
Goodwill		410,826		328,135
Other assets		29,666		32,299
Total assets	$	2,975,262	$	2,831,165
Liabilities and partners’ equity
Current liabilities:
Accounts payable	$	549,464	$	353,296
Working capital revolving credit facility—current portion		—		204,700
Lease liability—current portion		64,245		62,352
Environmental liabilities—current portion		4,582		4,642
Trustee taxes payable		38,344		44,223
Accrued expenses and other current liabilities		144,181		138,733
Derivative liabilities		24,425		31,654
Total current liabilities		825,241		839,600
Working capital revolving credit facility—less current portion		—		150,000
Revolving credit facility		99,000		43,400
Senior notes		740,589		739,310
Long-term lease liability—less current portion		231,704		228,203
Environmental liabilities—less current portion		62,749		48,163
Financing obligations		142,526		144,444
Deferred tax liabilities		65,199		56,817
Other long—term liabilities		58,794		53,461
Total liabilities		2,225,802		2,303,398
Partners’ equity
Series A preferred limited partners (2,760,000 units issued and outstanding at September 30, 2022 and December 31, 2021)		67,226		67,226
Series B preferred limited partners (3,000,000 units issued and outstanding at September 30, 2022 and December 31, 2021)		72,305		72,305
Common limited partners (33,995,563 units issued and 33,948,203 outstanding at September 30, 2022 and 33,995,563 units issued and 33,953,227 outstanding at December 31, 2021)		617,281		392,086
General partner interest (0.67% interest with 230,303 equivalent units outstanding at September 30, 2022 and December 31, 2021)		71		(1,948)
Accumulated other comprehensive loss		(7,423)		(1,902)
Total partners’ equity		749,460		527,767
Total liabilities and partners’ equity	$	2,975,262	$	2,831,165

The accompanying notes are an integral part of these consolidated financial statements.

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Sales	$	4,626,747	$	3,323,910	$	14,450,935	$	9,156,382
Cost of sales		4,298,368		3,120,852		13,634,842		8,630,247
Gross profit		328,379		203,058		816,093		526,135
Costs and operating expenses:
Selling, general and administrative expenses		65,123		54,674		182,274		155,029
Operating expenses		119,549		92,151		327,307		260,848
Amortization expense		2,118		2,742		6,734		8,138
Net loss (gain) on sale and disposition of assets		292		(192)		(81,468)		(675)
Long-lived asset impairment		—		—		—		188
Total costs and operating expenses		187,082		149,375		434,847		423,528
Operating income		141,297		53,683		381,246		102,607
Interest expense		(19,047)		(19,660)		(61,577)		(60,339)
Income before income tax expense		122,250		34,023		319,669		42,268
Income tax expense		(10,811)		(386)		(14,938)		(789)
Net income		111,439		33,637		304,731		41,479
Less: General partner’s interest in net income, including incentive distribution rights		2,027		993		5,370		2,581
Less: Preferred limited partner interest in net income		3,463		3,463		10,389		8,746
Net income attributable to common limited partners	$	105,949	$	29,181	$	288,972	$	30,152
Basic net income per common limited partner unit	$	3.12	$	0.86	$	8.52	$	0.89
Diluted net income per common limited partner unit	$	3.12	$	0.86	$	8.48	$	0.88
Basic weighted average common limited partner units outstanding		33,917		33,897		33,932		33,934
Diluted weighted average common limited partner units outstanding		34,008		34,087		34,058		34,225

The accompanying notes are an integral part of these consolidated financial statements.

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net income	$	111,439	$	33,637	$	304,731	$	41,479
Other comprehensive loss:
Change in fair value of cash flow hedges		—		(3,760)		—		(2,936)
Change in pension liability		(1,068)		(350)		(5,521)		1,270
Total other comprehensive loss		(1,068)		(4,110)		(5,521)		(1,666)
Comprehensive income	$	110,371	$	29,527	$	299,210	$	39,813

The accompanying notes are an integral part of these consolidated financial statements.

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2022		2021
Cash flows from operating activities
Net income	$	304,731	$	41,479
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		78,572		76,172
Amortization of deferred financing fees		4,084		3,810
Bad debt expense		(303)		(20)
Unit-based compensation expense		1,521		563
Write-off of financing fees		—		365
Net gain on sale and disposition of assets		(81,468)		(675)
Long-lived asset impairment		—		188
Changes in operating assets and liabilities:
Accounts receivable		(18,584)		(133,591)
Accounts receivable-affiliate		(2,331)		19
Inventories		87,356		(27,726)
Broker margin deposits		5,077		(13,656)
Prepaid expenses, all other current assets and other assets		14,226		28,637
Accounts payable		196,168		107,076
Trustee taxes payable		(5,879)		3,257
Change in derivatives		(17,335)		32,097
Accrued expenses, all other current liabilities and other long-term liabilities		11,071		(18,938)
Net cash provided by operating activities		576,906		99,057
Cash flows from investing activities
Acquisitions		(255,268)		(18,034)
Capital expenditures		(65,829)		(65,557)
Seller note issuances		—		(1,690)
Proceeds from sale of property and equipment, net		126,395		3,804
Net cash used in investing activities		(194,702)		(81,477)
Cash flows from financing activities
Net proceeds from issuance of Series B preferred units		—		72,167
Net (payments on) borrowings from working capital revolving credit facility		(354,700)		68,500
Net borrowings from (payments on) revolving credit facility		55,600		(78,600)
Repurchase of common units		(2,567)		(3,772)
LTIP units withheld for tax obligations		(1,559)		(2,209)
Distributions to limited partners and general partner		(74,341)		(68,015)
Net cash used in financing activities		(377,567)		(11,929)
Cash and cash equivalents
Increase in cash and cash equivalents		4,637		5,651
Cash and cash equivalents at beginning of period		10,849		9,714
Cash and cash equivalents at end of period	$	15,486	$	15,365
Supplemental information
Cash paid during the period for interest	$	59,649	$	52,775

The accompanying notes are an integral part of these consolidated financial statements.

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(In thousands)

(Unaudited)


	Series A		Series B						Accumulated
	Preferred		Preferred		Common		General		Other		Total
	Limited		Limited		Limited		Partner		Comprehensive		Partners’
Three and nine months ended September 30, 2022	Partners		Partners		Partners		Interest		Income (Loss)		Equity
Balance at December 31, 2021	$	67,226	$	72,305	$	392,086	$	(1,948)	$	(1,902)	$	527,767
Net income		1,682		1,781		25,845		1,177		—		30,485
Distributions to limited partners and general partner		(1,682)		(1,781)		(19,887)		(1,012)		—		(24,362)
Unit-based compensation		—		—		204		—		—		204
Other comprehensive loss		—		—		—		—		(1,507)		(1,507)
LTIP units withheld for tax obligations		—		—		(6)		—		—		(6)
Dividends on repurchased units		—		—		25		—		—		25
Balance at March 31, 2022	$	67,226	$	72,305	$	398,267	$	(1,783)	$	(3,409)	$	532,606
Net income		1,682		1,781		157,178		2,166		—		162,807
Distributions to limited partners and general partner		(1,682)		(1,781)		(20,227)		(1,117)		—		(24,807)
Unit-based compensation		—		—		502		—		—		502
Other comprehensive loss		—		—		—		—		(2,946)		(2,946)
Repurchase of common units		—		—		(2,567)		—		—		(2,567)
Distribution equivalent rights		—		—		(324)		—		—		(324)
Dividends on repurchased units		—		—		26		—		—		26
Balance at June 30, 2022	$	67,226	$	72,305	$	532,855	$	(734)	$	(6,355)	$	665,297
Net income		1,682		1,781		105,949		2,027		—		111,439
Distributions to limited partners and general partner		(1,682)		(1,781)		(20,567)		(1,222)		—		(25,252)
Unit-based compensation		—		—		815		—		—		815
Other comprehensive loss		—		—		—		—		(1,068)		(1,068)
LTIP units withheld for tax obligations		—		—		(1,553)		—		—		(1,553)
Distribution equivalent rights		—		—		(247)		—		—		(247)
Dividends on repurchased units		—		—		29		—		—		29
Balance at September 30, 2022	$	67,226	$	72,305	$	617,281	$	71	$	(7,423)	$	749,460


	Series A		Series B						Accumulated
	Preferred		Preferred		Common		General		Other		Total
	Limited		Limited		Limited		Partner		Comprehensive		Partners’
Three and nine months ended September 30, 2021	Partners		Partners		Partners		Interest		Income (Loss)		Equity
Balance at December 31, 2020	$	67,226	$	—	$	428,842	$	(2,169)	$	1,600	$	495,499
Issuance of Series B preferred units		—		72,167		—		—		—		72,167
Net income (loss)		1,682		138		(6,856)		739		—		(4,297)
Distributions to limited partners and general partner		(1,682)		—		(18,698)		(642)		—		(21,022)
Unit-based compensation		—		—		259		—		—		259
Other comprehensive income		—		—		—		—		2,098		2,098
LTIP units withheld for tax obligations		—		—		(26)		—		—		(26)
Dividends on repurchased units		—		—		16		—		—		16
Balance at March 31, 2021	$	67,226	$	72,305	$	403,537	$	(2,072)	$	3,698	$	544,694
Net income		1,682		1,781		7,827		849		—		12,139
Distributions to limited partners and general partner		(1,682)		(1,781)		(19,547)		(906)		—		(23,916)
Unit-based compensation		—		—		352		—		—		352
Other comprehensive income		—		—		—		—		346		346
Repurchase of common units		—		—		(3,772)		—		—		(3,772)
LTIP units withheld for tax obligations		—		—		(10)		—		—		(10)
Dividends on repurchased units		—		—		786		—		—		786
Balance at June 30, 2021	$	67,226	$	72,305	$	389,173	$	(2,129)	$	4,044	$	530,619
Net income		1,682		1,781		29,181		993		—		33,637
Distributions to limited partners and general partner		(1,682)		(1,781)		(19,547)		(906)		—		(23,916)
Unit-based compensation		—		—		(48)		—		—		(48)
Other comprehensive loss		—		—		—		—		(4,110)		(4,110)
LTIP units withheld for tax obligation		—		—		(2,173)		—		—		(2,173)
Dividends on repurchased units		—		—		37		—		—		37
Balance at September 30, 2021	$	67,226	$	72,305	$	396,623	$	(2,042)	$	(66)	$	534,046

The accompanying notes are an integral part of these consolidated financial statements.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Basis of Presentation

Organization

Global Partners LP (the “Partnership”) is a master limited partnership formed in March 2005. The Partnership owns, controls or has 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”). The Partnership is one of the region’s largest independent owners, suppliers and operators of gasoline stations and convenience stores. As of September 30, 2022, the Partnership had a portfolio of 1,684 owned, leased and/or supplied gasoline stations, including 356 directly operated convenience stores, primarily in the Northeast. The Partnership is 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. The Partnership engages in the purchasing, selling, gathering, blending, storing and logistics of transporting petroleum and related products, including gasoline and gasoline blendstocks (such as ethanol), distillates (such as home heating oil, diesel and kerosene), residual oil, renewable fuels, crude oil and propane and in the transportation of petroleum products and renewable fuels by rail from the mid-continent region of the United States and Canada.

Global GP LLC, the Partnership’s general partner (the “General Partner”), manages the Partnership’s operations and activities and employs its officers and substantially all of its personnel, except for most of its gasoline station and convenience store employees who are employed by Global Montello Group Corp. (“GMG”), a wholly owned subsidiary of the Partnership.

The General Partner, which holds a 0.67% general partner interest in the Partnership, is owned by affiliates of the Slifka family. As of September 30, 2022, affiliates of the General Partner, including its directors and executive officers and their affiliates, owned 6,311,366 common units, representing a 18.6% limited partner interest.

COVID-19

Although the impact of COVID-19 has declined to date, it continues to make its presence felt in the Partnership’s corporate offices, at its retail sites and terminal locations and in the global supply chain. The Partnership continues to monitor these impacts while providing essential products and services, prioritizing the safety of the Partnership’s employees, customers and vendors in the communities where it operates.

2022 Events

Sale of the Revere Terminal—On June 28, 2022, the Partnership completed the sale of its terminal located on Boston Harbor in Revere, Massachusetts for a purchase price of $150.0 million in cash. See Note 11.

Amendments to the Credit Agreement—On March 9, 2022, the Partnership and certain of its subsidiaries entered into the sixth amendment to third amended and restated credit agreement which, among other things, increased the total aggregate commitment to $1.55 billion. On March 30, 2022, the Partnership and certain of its subsidiaries entered into the seventh amendment to third amended and restated credit agreement which, among other things, refreshed the accordion feature under the credit agreement. See Note 7 for additional information on these amendments.

Acquisitions— On September 20, 2022, the Partnership acquired substantially all of the assets from Tidewater Convenience, Inc. (“Tidewater”). See Note 2.

On February 1, 2022, the Partnership acquired substantially all of the retail motor fuel assets from Miller Oil Co., Inc. (“Miller Oil”). See Note 2.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On January 25, 2022, the Partnership acquired substantially all of the assets from Connecticut-based Consumers Petroleum of Connecticut, Incorporated (“Consumers Petroleum”). See Note 2.

Basis of Presentation

The financial results of Tidewater, Miller Oil and Consumers Petroleum since the respective acquisition date are included in the accompanying statements of operations for the three and nine months ended September 30, 2022. The accompanying consolidated financial statements as of September 30, 2022 and December 31, 2021 and for the three and nine months ended September 30, 2022 and 2021 reflect the accounts of the Partnership. Upon consolidation, all intercompany balances and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition and operating results for the interim periods. The interim financial information, which has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), should be read in conjunction with the consolidated financial statements for the year ended December 31, 2021 and notes thereto contained in the Partnership’s Annual Report on Form 10-K. The significant accounting policies described in Note 2, “Summary of Significant Accounting Policies,” of such Annual Report on Form 10-K are the same used in preparing the accompanying consolidated financial statements.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2022. The consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021.

Concentration of Risk

Due to the nature of the Partnership’s businesses and its reliance, in part, on consumer travel and spending patterns, the Partnership may experience more demand for gasoline during the late spring and summer months than during the fall and winter months. Travel and recreational activities are typically higher in these months in the geographic areas in which the Partnership operates, increasing the demand for gasoline. Therefore, the Partnership’s volumes in gasoline are typically higher in the second and third quarters of the calendar year. However, COVID-19 has had a negative impact on gasoline demand and the extent and duration of that impact remains uncertain. As demand for some of the Partnership’s 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 the Partnership’s quarterly operating results.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the Partnership’s product sales and other revenues as a percentage of the consolidated sales for the periods presented:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Gasoline sales: gasoline and gasoline blendstocks (such as ethanol)	71	%	76	%	68	%	73	%
Distillates (home heating oil, diesel and kerosene) and residual oil sales	26	%	19	%	29	%	22	%
Crude oil sales and crude oil logistics revenue	—	%	1	%	—	%	1	%
Convenience store and prepared food sales, rental income and sundries	3	%	4	%	3	%	4	%
Total	100	%	100	%	100	%	100	%

The following table presents the Partnership’s product margin by segment as a percentage of the consolidated product margin for the periods presented:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Wholesale segment	23	%	19	%	25	%	18	%
Gasoline Distribution and Station Operations segment	74	%	79	%	72	%	80	%
Commercial segment	3	%	2	%	3	%	2	%
Total	100	%	100	%	100	%	100	%

See Note 13, “Segment Reporting,” for additional information on the Partnership’s operating segments.

None of the Partnership’s customers accounted for greater than 10% of total sales for the three and nine months ended September 30, 2022 and 2021.

Note 2. Business Combinations

Acquisition from Tidewater Convenience, Inc.—On September 20, 2022, the Partnership acquired substantially all of the assets from Tidewater in a cash transaction. The acquisition includes 14 company-operated Tidewater convenience stores and 1 fuel site, all located in Virginia. The purchase price was approximately $40.4 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of September 20, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Tidewater, including inventory, property and equipment and right of use assets, and liabilities.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The following table presents the preliminary 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	$	1,125
Property and equipment		40,706
Right of use assets		828
Total identifiable assets purchased		42,659
Liabilities assumed:
Environmental liabilities		(2,154)
Lease liability		(508)
Other non-current liabilities		(293)
Total liabilities assumed		(2,955)
Net identifiable assets acquired		39,704
Goodwill		738
Net assets acquired	$	40,442

The fair values of the remaining assets and liabilities noted above approximate their carrying values at September 20, 2022, the acquisition date.

In connection with the acquisition of Tidewater, the Partnership incurred acquisition costs of approximately $0.3 million for each of the three and nine months ended September 30, 2022, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Acquisition from Miller Oil Co., Inc.—On February 1, 2022, the Partnership acquired substantially all of the retail motor fuel assets from Miller Oil in a cash transaction. The acquisition includes 21 company-operated Miller’s Neighborhood Market convenience stores and 2 fuel sites that are either owned or leased, including lessee dealer and commissioned agent locations, all located in Virginia, and 34 fuel supply only sites, primarily in Virginia. The purchase price was approximately $60.1 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of February 1, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Miller Oil, including inventory, property and equipment, right of use assets, intangible assets and liabilities.

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The following table presents the preliminary 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	$	2,249
Property and equipment		37,530
Right of use assets		5,139
Intangibles		5,555
Other assets		837
Total identifiable assets purchased		51,310
Liabilities assumed:
Accrued expenses and other current liabilities		(1,190)
Environmental liabilities		(4,816)
Lease liability		(5,969)
Other non-current liabilities		(1,384)
Total liabilities assumed		(13,359)
Net identifiable assets acquired		37,951
Goodwill		22,148
Net assets acquired	$	60,099

During the three months ended September 30, 2022, the Partnership recorded the following changes to the preliminary purchase accounting, which resulted in an increase in goodwill to $22.1 million at September 30, 2022 from $21.8 million at June 30, 2022 (in thousands):


Goodwill – June 30, 2022	$	21,800
Decrease in deferred tax asset		128
Increase in environmental liabilities		220
Goodwill – September 30, 2022	$	22,148

The fair values of the remaining assets and liabilities noted above approximate their carrying values at February 1, 2022, 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 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 that are being amortized over three to eight years. Amortization expense related to the intangible assets was $0.2 million and $0.6 million for the three and nine months ended September 30, 2022, respectively.

In connection with the acquisition of Miller Oil, the Partnership incurred acquisition costs of approximately $0.2 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Acquisition from Consumers Petroleum of Connecticut Incorporated—On January 25, 2022, the Partnership acquired substantially all of the assets from Consumers Petroleum in a cash transaction. The acquisition includes 26 company-owned Wheels convenience stores and related fuel operations located in Connecticut and 22 fuel-supply only

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sites located in Connecticut and New York. The purchase price, subject to post-closing adjustments, was approximately $154.7 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of January 25, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Consumers Petroleum, including inventory, property and equipment, right of use assets, intangible assets and liabilities.

The following table presents the preliminary 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	$	2,475
Property and equipment		88,262
Right of use assets		4,482
Intangibles		4,136
Other non-current assets		366
Total identifiable assets purchased		99,721
Liabilities assumed:
Accrued expenses and other current liabilities		(192)
Environmental liabilities		(7,161)
Lease liability		(2,372)
Other non-current liabilities		(609)
Total liabilities assumed		(10,334)
Net identifiable assets acquired		89,387
Goodwill		65,340
Net assets acquired	$	154,727

During the three months ended September 30, 2022, the Partnership recorded the following change to the preliminary purchase accounting, which resulted in an increase in goodwill to $65.3 million at September 30, 2022 from $65.2 million at June 30, 2022 (in thousands):


Goodwill – June 30, 2022	$	65,210
Increase in environmental liabilities		130
Goodwill – September 30, 2022	$	65,340

The fair values of the remaining assets and liabilities noted above approximate their carrying values at January 25, 2022, the acquisition date.

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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 that are being amortized over four to eight years. Amortization expense related to the intangible assets was $0.2 million and $0.4 million for the three and nine months ended September 30, 2022, respectively

In connection with the acquisition of Consumers Petroleum, the Partnership incurred acquisition costs of approximately $0.1 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Supplemental Pro Forma Information—Revenues and net income not included in the Partnership’s consolidated operating results for Tidewater, Miller Oil and Consumers Petroleum from January 1, 2022 through the respective acquisition date were immaterial.

Note 3. Revenue from Contract Customers

Disaggregation of Revenue

The following table provides the disaggregation of revenue from contracts with customers and other sales by segment for the periods presented (in thousands):


	Three Months Ended September 30, 2022
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels and crude oil	$	752,652	$	1,631,078	$	199,386	$	2,583,116
Station operations		—		138,978		—		138,978
Total revenue from contracts with customers		752,652		1,770,056		199,386		2,722,094
Other sales:
Revenue originating as physical forward contracts and exchanges		1,757,406		—		126,764		1,884,170
Revenue from leases		508		19,975		—		20,483
Total other sales		1,757,914		19,975		126,764		1,904,653
Total sales	$	2,510,566	$	1,790,031	$	326,150	$	4,626,747


	Three Months Ended September 30, 2021
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels and crude oil	$	586,951	$	1,151,251	$	133,011	$	1,871,213
Station operations		—		114,807		—		114,807
Total revenue from contracts with customers		586,951		1,266,058		133,011		1,986,020
Other sales:
Revenue originating as physical forward contracts and exchanges		1,248,474		—		69,535		1,318,009
Revenue from leases		562		19,319		—		19,881
Total other sales		1,249,036		19,319		69,535		1,337,890
Total sales	$	1,835,987	$	1,285,377	$	202,546	$	3,323,910

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	Nine Months Ended September 30, 2022
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels and crude oil	$	2,778,837	$	4,721,475	$	665,143	$	8,165,455
Station operations		—		360,211		—		360,211
Total revenue from contracts with customers		2,778,837		5,081,686		665,143		8,525,666
Other sales:
Revenue originating as physical forward contracts and exchanges		5,509,881		—		354,398		5,864,279
Revenue from leases		2,042		58,948		—		60,990
Total other sales		5,511,923		58,948		354,398		5,925,269
Total sales	$	8,290,760	$	5,140,634	$	1,019,541	$	14,450,935


	Nine Months Ended September 30, 2021
Revenue from contracts with customers:	Wholesale		GDSO		Commercial		Total
Refined petroleum products, renewable fuels and crude oil	$	1,890,838	$	2,930,446	$	228,895	$	5,050,179
Station operations		—		301,459		—		301,459
Total revenue from contracts with customers		1,890,838		3,231,905		228,895		5,351,638
Other sales:
Revenue originating as physical forward contracts and exchanges		3,492,524		—		254,534		3,747,058
Revenue from leases		1,693		55,993		—		57,686
Total other sales		3,494,217		55,993		254,534		3,804,744
Total sales	$	5,385,055	$	3,287,898	$	483,429	$	9,156,382

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, 2022 and December 31, 2021.

Note 4. 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 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

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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,
	2022		2021
Distillates: home heating oil, diesel and kerosene	$	116,792	$	244,067
Gasoline		130,261		123,824
Gasoline blendstocks		46,915		50,599
Crude oil		2,618		3,678
Residual oil		97,960		60,286
Renewable identification numbers (RINs)		3,418		4,218
Convenience store inventory		29,767		22,845
Total	$	427,731	$	509,517

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 $0.7 million and $1.3 million at September 30, 2022 and December 31, 2021, respectively. Negative exchange balances are accounted for as accounts payable and amounted to $38.5 million and $20.6 million at September 30, 2022 and December 31, 2021, respectively. Exchange transactions are valued using current carrying costs.

Note 5. Goodwill

The following table presents changes in goodwill, all of which has been allocated to the Gasoline Distribution and Station Operations (“GDSO”) segment (in thousands):


Balance at December 31, 2021	$	328,135
Acquisition of Tidewater (1)		738
Acquisition of Miller Oil (1)		22,148
Acquisition of Consumers Petroleum (1)		65,340
Dispositions (2)		(5,535)
Balance at September 30, 2022	$	410,826

(1)	See Note 2 for information on the Partnership’s business combinations.

(2)	Dispositions represent derecognition of goodwill associated with the sale and disposition of certain assets.

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Note 6. Property and Equipment

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


	September 30,		December 31,
	2022		2021
Buildings and improvements	$	1,410,991	$	1,327,002
Land		536,927		457,260
Fixtures and equipment		41,202		38,646
Idle plant assets		30,500		30,500
Construction in process		50,644		52,716
Capitalized internal use software		33,610		32,740
Total property and equipment		2,103,874		1,938,864
Less accumulated depreciation		886,868		839,516
Total	$	1,217,006	$	1,099,348

Property and equipment includes retail gasoline station assets held for sale of $0 and $6.1 million at September 30, 2022 and December 31, 2021, respectively, and terminal assets held for sale of $0 and $26.3 million at September 30, 2022 and December 31, 2021, respectively.

At September 30, 2022, the Partnership had a $38.2million 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. 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 million related to the ethanol plant was included in property and equipment and classified as idle plant assets at September 30, 2022 and December 31, 2021.

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 ethanol or 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.

Note 7. 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 $1.55 billion senior secured credit facility (the “Credit Agreement”). The Credit Agreement matures on May 6, 2024.

On March 9, 2022, the Partnership and certain of its subsidiaries entered into a sixth amendment to the Credit Agreement (the “Sixth Amendment”) which, among other things, amended certain terms and provisions of the Credit Agreement to provide for $200.0 million of working capital interim commitments which increased the total aggregate commitment from $1.35 billion to $1.55 billion. On March 30, 2022, the Partnership and certain of its subsidiaries entered into a seventh amendment to the Credit Agreement (the “Seventh Amendment”) which, among other things, (i) increased the working capital revolving credit facility by $200.0 million and simultaneously reduced the working capital interim commitments to $0; (ii) refreshed the accordion feature under the Credit Agreement to permit the Partnership to request increases of up to $300.0 million in the total credit facility; and (iii) replaced the Cost of Funds (as defined in the Credit Agreement) pricing option with a Daily secured overnight financing rate (“SOFR”) pricing option. All other material terms of the Credit Agreement remain substantially the same as disclosed in Note 8 of Notes to

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Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021.

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 the Partnership’s borrowing base and $1.1 billion; and

●

a $450.0 million revolving credit facility to be used for general corporate purposes.

In addition, the Credit Agreement has an accordion feature whereby the Partnership may request on the same terms and conditions then applicable to the Credit Agreement, provided no Event of Default (as defined in the Credit Agreement) then exists, an increase to the working capital revolving credit facility, the revolving credit facility, or both, by up to another $300.0 million, in the aggregate, for a total credit facility of up to $1.85 billion. Any such request for an increase must be in a minimum amount of $25.0 million. The Partnership cannot provide assurance, however, that its lending group will agree to fund any request by the Partnership for additional amounts in excess of the total available commitments of $1.55 billion.

In addition, the Credit Agreement includes a swing line pursuant to which Bank of America, N.A., as the swing line lender, may make swing line loans in U.S. dollars in an aggregate amount equal to the lesser of (a) $75.0 million and (b) the Aggregate WC Commitments (as defined in the Credit Agreement). Swing line loans will bear interest at the Base Rate (as defined in the Credit Agreement). The swing line is a sub-portion of the working capital revolving credit facility and is not an addition to the total available commitments of $1.55 billion.

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.

Borrowings under the working capital revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 2.00% to 2.50%, or (2) the base rate plus 1.00% to 1.50%, each depending on the Utilization Amount (as defined in the Credit Agreement). Borrowings under the revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 1.75% to 2.75%, or (2) the base rate plus 0.75% to 1.75%, each depending on the Combined Total Leverage Ratio (as defined in the Credit Agreement).

The average interest rates for the Credit Agreement were 4.1% and 2.3% for the three months ended September 30, 2022 and 2021, respectively, and 3.1% and 2.5% for the nine months ended September 30, 2022 and 2021, 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 throughout the 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, 2022 the Partnership estimated working capital revolving credit facility borrowings will equal or exceed $0 over the next twelve months.

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The table below presents the total borrowings and availability under the Credit Agreement (in thousands):


	September 30,		December 31,
	2022		2021
Total available commitments	$	1,550,000	$	1,350,000

Working capital revolving credit facility—current portion		—		204,700
Working capital revolving credit facility—less current portion		—		150,000
Revolving credit facility		99,000		43,400
Total borrowings outstanding		99,000		398,100

Less outstanding letters of credit		205,200		156,000

Total remaining availability for borrowings and letters of credit (1)	$	1,245,800	$	795,900

(1)	Subject to borrowing base limitations.

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, 2022.

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, 2021 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 Sixth Amendment and Seventh Amendment, the Partnership capitalized additional financing fees of $1.0 million. The Partnership had unamortized deferred financing fees of $15.7 million and $18.8 million at September 30, 2022 and December 31, 2021, 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 $7.5 million at September 30, 2022 and December 31, 2021, 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 $9.4 million and $10.7 million at September 30, 2022 and December 31, 2021, respectively. Unamortized fees related to the Partnership’s sale-lease transactions are presented as a direct deduction from the carrying amount of the financing obligation and amounted to $0.6 million at both September 30, 2022 and December 31, 2021.

Amortization expense of approximately $1.3 million and $1.2 million for the three months ended September 30, 2022 and 2021, respectively, and $4.1 million and $3.8 million for the nine months ended September 30, 2022 and 2021, respectively is included in interest expense in the accompanying consolidated statements of operations.

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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,
	2022		2021
Borrowings from working capital revolving credit facility	$	1,641,800	$	1,573,700
Payments on working capital revolving credit facility		(1,996,500)		(1,505,200)
Net (payments on) borrowings from working capital revolving credit facility	$	(354,700)	$	68,500
Borrowings from revolving credit facility	$	423,000	$	10,000
Payments on revolving credit facility		(367,400)		(88,600)
Net borrowings from (payments on) revolving credit facility	$	55,600	$	(78,600)

Senior Notes

The Partnership had 7.00% senior notes due 2027 and 6.875% senior notes due 2029 outstanding at September 30, 2022 and December 31, 2021. 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, 2021 for additional information on these senior notes.

Financing Obligations

The Partnership had financing obligations outstanding at September 30, 2022 and December 31, 2021 associated with historical sale-leaseback transactions that did not meet the criteria for sale accounting. 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, 2021 for additional information on these financial obligations.

Note 8. 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. The Partnership uses these exchange-traded and OTC derivatives to hedge commodity price risk associated with its inventory 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 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.

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The following table summarizes the notional values related to the Partnership’s derivative instruments outstanding at September 30, 2022:


	Units (1)		Unit of Measure
Exchange-Traded Derivatives
Long		67,667	Thousands of barrels
Short		(70,208)	Thousands of barrels

OTC Derivatives (Petroleum/Ethanol)
Long		5,980	Thousands of barrels
Short		(6,355)	Thousands of barrels

(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

Fair Value Hedges

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 statements of operations.

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	2022		2021		2022		2021
Derivatives in fair value hedging relationship
Exchange-traded futures contracts and OTC derivative contracts for petroleum commodity products	Cost of sales	$	11,859	$	(25,270)	$	8,514	$	(54,933)
Hedged items in fair value hedge relationship
Physical inventory	Cost of sales	$	(5,532)	$	28,695	$	19,544	$	53,073

Cash Flow Hedges

In 2020, to hedge the Partnership’s cash flow risk relative to certain trends and the fluctuations in commodity prices observed within the GDSO segment, the Partnership entered into exchange-traded commodity swap contracts and 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. All exchange traded commodity swap contracts expired on December 31, 2021; therefore, the amount of income recognized in other comprehensive income as of September 30, 2022 and expected to be reclassified into earnings within the next 12 months was $0.

The amount of income recognized in other comprehensive income for derivatives designated in cash flow hedging relationships was $0 and $0.5 million for the three months ended September 30, 2022 and 2021, respectively, and $0 and $7.7 million for the nine months ended September 30, 2022 and 2021, respectively. The amount of income reclassified from other comprehensive income into cost of sales for derivatives designated in cash flow hedging relationships was $0

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and $4.3 million for the three months ended September 30, 2022 and 2021, respectively, and $0 and $10.7 million for the nine months ended September 30, 2022 and 2021, respectively.

Derivatives Not Accounted for as Hedges

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

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

Derivatives not designated as

Recognized in

September 30,

hedging instruments

Income on Derivatives

2022

2021

2022

2021

Commodity contracts

Cost of sales

8,195

1,977

17,269

3,110

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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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, 2022 and December 31, 2021 (in thousands):


		September 30, 2022
		Derivatives		Derivatives Not
		Designated as		Designated as
		Hedging		Hedging
	Balance Sheet Location	Instruments		Instruments		Total
Asset Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	4,149	$	115,081	$	119,230
Forward derivative contracts (1)	Derivative assets		—		21,758		21,758
Total asset derivatives		$	4,149	$	136,839	$	140,988

Liability Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	—	$	(66,501)	$	(66,501)
Forward derivative contracts (1)	Derivative liabilities		—		(24,425)		(24,425)
Total liability derivatives		$	—	$	(90,926)	$	(90,926)


		December 31, 2021
		Derivatives		Derivatives Not
		Designated as		Designated as
		Hedging		Hedging
	Balance Sheet Location	Instruments		Instruments		Total
Asset Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	1,476	$	106,629	$	108,105
Forward derivative contracts (1)	Derivative assets		—		11,652		11,652
Total asset derivatives		$	1,476	$	118,281	$	119,757

Liability Derivatives:
Exchange-traded derivative contracts	Broker margin deposits	$	(9,201)	$	(72,993)	$	(82,194)
Forward derivative contracts (1)	Derivative liabilities		—		(31,654)		(31,654)
Total liability derivatives		$	(9,201)	$	(104,647)	$	(113,848)

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

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.

Please read Note 2 of Notes to Consolidated Financial Statements in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on derivative financial instruments.

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Note 9. 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, 2022 and December 31, 2021 (in thousands):


	Fair Value at September 30, 2022
					Cash Collateral
	Level 1		Level 2		Netting		Total
Assets:
Forward derivative contracts (1)	$	—	$	21,758	$	—	$	21,758
Exchange-traded/cleared derivative instruments (2)		52,729		—		(24,148)		28,581
Pension plans		17,253		—		—		17,253
Total assets	$	69,982	$	21,758	$	(24,148)	$	67,592

Liabilities:
Forward derivative contracts (1)	$	—	$	(24,425)	$	—	$	(24,425)


	Fair Value at December 31, 2021
					Cash Collateral
	Level 1		Level 2		Netting		Total
Assets:
Forward derivative contracts (1)	$	—	$	11,652	$	—	$	11,652
Exchange-traded/cleared derivative instruments (2)		25,911		—		7,747		33,658
Pension plans		22,703		—		—		22,703
Total assets	$	48,614	$	11,652	$	7,747	$	68,013

Liabilities:
Forward derivative contracts (1)	$	—	$	(31,654)	$	—	$	(31,654)

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

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

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 8.

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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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, 2022				December 31, 2021
	Face		Fair		Face		Fair
	Value		Value		Value		Value
7.00% senior notes due 2027	$	400,000	$	364,000	$	400,000	$	412,000
6.875% senior notes due 2029	$	350,000	$	314,125	$	350,000	$	358,750

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 2 for acquired assets and liabilities measured on a non-recurring basis.

Note 10. Environmental Liabilities

In connection with the acquisitions of retail gasoline and convenience store assets described in Note 2, the Partnership assumed certain environmental liabilities, including certain ongoing environmental remediation efforts. As a result, the Partnership recorded, on an undiscounted basis, a total environmental liability of approximately $2.1 million, $4.8 million and $7.2 million for Tidewater, Miller Oil and Consumers Petroleum, respectively, as of September 30, 2022.

The following table presents a summary roll forward of the Partnership’s environmental liabilities at September 30, 2022 (in thousands):


	Balance at								Other		Balance at
	December 31,		Additions		Payments		Dispositions		Adjustments		September 30,
Environmental Liability Related to:	2021		2022		2022		2022		2022		2022
Retail gasoline stations	$	49,261	$	14,131	$	(2,558)	$	(469)	$	5,011	$	65,376
Terminals		3,544		—		(46)		(1,543)		—		1,955
Total environmental liabilities	$	52,805	$	14,131	$	(2,604)	$	(2,012)	$	5,011	$	67,331
Current portion	$	4,642									$	4,582
Long-term portion		48,163										62,749
Total environmental liabilities	$	52,805									$	67,331

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 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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Note 11. Related Party Transactions

The Partnership is a party to a services agreement with various entities which own limited partner interests in the Partnership and interests in the General Partner and which are 100% owned by members of the Slifka family (the “Slifka Entities Services Agreement”), pursuant to which the Partnership provides certain tax, accounting, treasury, and legal support services and such Slifka entities pay the Partnership an annual services fee of $20,000, and which Slifka Entities Services Agreement has been approved by the Conflicts Committee of the board of directors of the General Partner. The Slifka Entities Services Agreement is for an indefinite term and any party may terminate some or all of the services upon ninety (90) days’ advance written notice. As of September 30, 2022, no such notice of termination had been given by any party to the Slifka Entities Services Agreement.

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 $45.8 million and $48.0 million for the three months ended September 30, 2022 and 2021, respectively, and $128.0 million and $113.0 million for the nine months ended September 30, 2022 and 2021, 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.

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


	September 30,		December 31,
	2022		2021
Receivables from the General Partner (1)	$	3,470	$	1,139

(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.

Sale of the Revere Terminal—On June 28, 2022, the Partnership completed the sale of its terminal located on Boston Harbor in Revere, Massachusetts (the “Revere Terminal”) to Revere MA Owner LLC (the “Revere Buyer”) for a purchase price of $150.0 million in cash. In connection with closing under the purchase agreement between the Partnership and the Revere Buyer, the Partnership entered into a leaseback agreement, which meets the criteria for sale accounting, with the Revere Buyer pursuant to which the Partnership leases back key infrastructure at the Revere Terminal, including certain tanks, dock access rights, and loading rack infrastructure, to allow the Partnership to continue business operations at the Revere Terminal. The term of the leaseback agreement, including all renewal options exercisable at the Partnership’s election, could extend through September 30, 2039.

Pursuant to the terms of the purchase agreement the Partnership entered into with affiliates of the Slifka family (the “Initial Sellers”), related parties, in 2015 to acquire the Revere Terminal, the Initial Sellers are entitled to an amount equal to fifty percent of the net proceeds (as defined in the 2015 purchase agreement) (the “Initial Sellers Share”) from the sale of the Revere Terminal. At the time of the 2022 closing, the preliminary calculation of the Initial Sellers Share was approximately $44.3 million, which amount is subject to future revisions. The final calculation of the Initial Sellers Share, including a sharing of any additional expenses in order to satisfy outstanding obligations under the Partnership’s current government storage contract at the Revere Terminal and potential operating losses or profits relating to the operation of the Revere Terminal during the initial leaseback term, will occur upon the expiration of such storage contract. The Partnership recorded approximately $2.7 million of additional expenses due to the Initial Sellers which are included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of September 30, 2022 and in selling, general and administrative expenses in the accompanying consolidated statements of income for each of three and nine months ended September 30, 2022.

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After closing costs and the preliminary payment of the Initial Sellers Share, the Partnership received net proceeds of approximately $98.8 million, which is included in proceeds from sale of property and equipment, net in the accompanying consolidated statement of cash flows for the nine months ended September 30, 2022.

In connection with the sale of the Revere Terminal, the Partnership recognized a net gain of approximately $76.7 million for the nine months ended September 30, 2022, which is included in net gain on sale and disposition of assets in the accompanying consolidated statement of income. The preliminary payment of approximately $44.3 million to the Initial Sellers is included in the measurement of the $76.7 million net gain recognized.

Note 12. Partners’ Equity and Cash Distributions

Partners’ Equity

Common Units and General Partner Interest

At September 30, 2022, there were 33,995,563 common units issued, including 6,311,366 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, 2022.

Series A Preferred Units

At September 30, 2022, there were 2,760,000 9.75% Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Units issued representing limited partner interests (the “Series A Preferred Units”) for $25.00 per Series A Preferred Unit. There have been no changes to the Series A Preferred Units during the three and nine months ended September 30, 2022.

Series B Preferred Units

At September 30, 2022, there were 3,000,000 9.50% Series B Fixed Rate Cumulative Redeemable Perpetual Preferred Units issued representing limited partners interests (the “Series B Preferred Units”) for $25.00 per Series B Preferred Unit. There have been no changes to the Series B Preferred Units during the three and nine months ended September 30, 2022.

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.

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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
First Target Distribution		up to $0.4625	99.33	%	0.67	%
Second Target Distribution		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	%
Thereafter		above $0.6625	51.33	%	48.67	%

The Partnership paid the following cash distributions to common unitholders during 2022 (in thousands, except per unit data):


	For the	Per Unit
Cash Distribution	Quarter	Cash		Common		General		Incentive		Total Cash
Payment Date	Ended	Distribution		Units		Partner		Distribution		Distribution
2/14/2022 (1)	12/31/21	$	0.5850	$	19,887	$	141	$	871	$	20,899
5/13/2022 (1)	03/31/22		0.5950		20,227		144		973		21,344
8/12/2022 (1)	06/30/22		0.6050		20,567		147		1,075		21,789

(1)	This distribution resulted in the Partnership reaching its third target level distribution for this quarter. As a result, the General Partner, as the holder of the IDRs, received an incentive distribution.

In addition, on October 25, 2022, the board of directors of the General Partner declared a quarterly cash distribution of $0.6250 per unit ($2.50 per unit on an annualized basis) on all of its outstanding common units for the period from July 1, 2022 through September 30, 2022. On November 14, 2022, the Partnership will pay this cash distribution to its common unitholders of record as of the close of business on November 8, 2022.

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 (each, a “Series A Distribution Payment Date”), commencing on November 15, 2018, to holders of record as of the opening of business on the February 1, May 1, August 1 or November 1 next preceding the Series A 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 Series A Distribution Payment Date.

Distributions on the Series B Preferred Units are cumulative from March 24, 2021, the original issue date of the Series B Preferred Units, and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year (each, a “Series B Distribution Payment Date”), commencing on May 15, 2021, to holders of record as of the opening of business on the February 1, May 1, August 1 or November 1 next preceding the Series B Distribution Payment Date, in each case, when, as, and if declared by the General Partner out of legally available funds for such

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purpose. Distributions on the Series B Preferred Units will be paid out of Available Cash with respect to the quarter immediately preceding the applicable Series B Distribution Payment Date.

The Partnership paid the following cash distributions on the Series A Preferred Units and the Series B Preferred Units during 2022 (in thousands, except per unit data):


		Series A Preferred Units				Series B Preferred Units
	For the	Per Unit				Per Unit
Cash Distribution	Quarterly Period	Cash		Total Cash		Cash		Total Cash
Payment Date	Covering	Distribution		Distribution		Distribution		Distribution
2/15/2022	11/15/21 - 2/14/22	$	0.609375	$	1,682	$	0.59375	$	1,781
5/16/2022	2/15/22 - 5/14/22		0.609375		1,682		0.59375		1,781
8/15/2022	5/15/22 - 8/14/22		0.609375		1,682		0.59375		1,781

In addition, on October 17, 2022, the board of directors (“the Board”) 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, 2022 through November 14, 2022. This distribution will be payable on November 15, 2022 to holders of record as of the opening of business on November 1, 2022.

The Board also declared a quarterly cash distribution of $0.59375 per unit ($2.375 per unit on an annualized basis) on the Series B Preferred Units for the period from August 15, 2022 through November 14, 2022. This distribution will be payable on November 15, 2022 to holders of record as of the opening of business on November 1, 2022.

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Note 13. 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,
	2022		2021		2022		2021
Wholesale Segment:
Sales
Gasoline and gasoline blendstocks	$	1,623,599	$	1,371,621	$	5,046,457	$	3,696,677
Other oils and related products (1)		886,877		451,172		3,242,031		1,641,250
Crude oil (2)		90		13,194		2,272		47,128
Total	$	2,510,566	$	1,835,987	$	8,290,760	$	5,385,055
Product margin
Gasoline and gasoline blendstocks	$	54,260	$	22,458	$	93,009	$	62,379
Other oils and related products (1)		25,716		22,625		130,690		54,580
Crude oil (2)		(646)		(2,814)		(6,706)		(10,662)
Total	$	79,330	$	42,269	$	216,993	$	106,297
Gasoline Distribution and Station Operations Segment:
Sales
Gasoline	$	1,631,078	$	1,151,251	$	4,721,475	$	2,930,446
Station operations (3)		158,953		134,126		419,159		357,452
Total	$	1,790,031	$	1,285,377	$	5,140,634	$	3,287,898
Product margin
Gasoline	$	187,994	$	112,446	$	432,732	$	294,001
Station operations (3)		73,614		65,269		200,719		176,567
Total	$	261,608	$	177,715	$	633,451	$	470,568
Commercial Segment:
Sales	$	326,150	$	202,546	$	1,019,541	$	483,429
Product margin	$	10,389	$	3,916	$	31,042	$	10,807
Combined sales and Product margin:
Sales	$	4,626,747	$	3,323,910	$	14,450,935	$	9,156,382
Product margin (4)	$	351,327	$	223,900	$	881,486	$	587,672
Depreciation allocated to cost of sales		(22,948)		(20,842)		(65,393)		(61,537)
Combined gross profit	$	328,379	$	203,058	$	816,093	$	526,135

(1)	Other oils and related products primarily consist of distillates and residual oil.

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

(3)	Station operations consist of convenience store and prepared food sales, rental income and sundries.

(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 111 million gallons and 123 million gallons of the GDSO segment’s sales for the three months ended September 30, 2022 and 2021, respectively, and 318 million gallons and 342 million gallons of the GDSO segment’s sales for the nine months ended September 30, 2022 and 2021, 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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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,
	2022		2021		2022		2021
Combined gross profit	$	328,379	$	203,058	$	816,093	$	526,135
Operating costs and expenses not allocated to operating segments:
Selling, general and administrative expenses		65,123		54,674		182,274		155,029
Operating expenses		119,549		92,151		327,307		260,848
Amortization expense		2,118		2,742		6,734		8,138
Net loss (gain) on sale and disposition of assets		292		(192)		(81,468)		(675)
Long-lived asset impairment		—		—		—		188
Total operating costs and expenses		187,082		149,375		434,847		423,528
Operating income		141,297		53,683		381,246		102,607
Interest expense		(19,047)		(19,660)		(61,577)		(60,339)
Income tax expense		(10,811)		(386)		(14,938)		(789)
Net income	$	111,439	$	33,637	$	304,731	$	41,479

The Partnership’s foreign assets and foreign sales were immaterial as of and for the three and nine months ended September 30, 2022 and 2021.

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, 2022 and December 31, 2021 (in thousands):


		Wholesale		Commercial		GDSO		Unallocated		Total
September 30, 2022	$	606,227	$	—	$	1,918,464	$	450,571	$	2,975,262
December 31, 2021	$	739,523	$	—	$	1,655,475	$	436,167	$	2,831,165

Note 14. Net Income 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, 2022 and December 31, 2021, respectively, excludes 47,360 and 42,336 common units held on behalf of the Partnership pursuant to its repurchase program. These units are not deemed outstanding for purposes of calculating net income per common limited partner unit (basic and diluted). For all periods presented below, the Partnership’s preferred units are not potentially dilutive securities based on the nature of the conversion feature.

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


	Three Months Ended September 30, 2022								Three Months Ended September 30, 2021
			Common		General						Common		General
			Limited		Partner						Limited		Partner
Numerator:	Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs
Net income	$	111,439	$	109,412	$	2,027	$	—	$	33,637	$	32,644	$	993	$	—
Declared distribution	$	22,680	$	21,247	$	153	$	1,280	$	20,453	$	19,547	$	138	$	768
Assumed allocation of undistributed net income		88,759		88,165		594		—		13,184		13,097		87		—
Assumed allocation of net income	$	111,439	$	109,412	$	747	$	1,280	$	33,637	$	32,644	$	225	$	768
Less: Preferred limited partner interest in net income				3,463								3,463
Net income attributable to common limited partners			$	105,949							$	29,181
Denominator:
Basic weighted average common units outstanding				33,917								33,897
Dilutive effect of phantom units				91								190
Diluted weighted average common units outstanding				34,008								34,087
Basic net income per common limited partner unit			$	3.12							$	0.86
Diluted net income per common limited partner unit			$	3.12							$	0.86


	Nine Months Ended September 30, 2022								Nine Months Ended September 30, 2021
			Common		General						Common		General
			Limited		Partner						Limited		Partner
Numerator:	Total		Partners		Interest		IDRs		Total		Partners		Interest		IDRs
Net income	$	304,731	$	299,361	$	5,370	$	—	$	41,479	$	38,898	$	2,581	$	—
Declared distribution	$	65,813	$	62,041	$	444	$	3,328	$	61,359	$	58,641	$	414	$	2,304
Assumed allocation of undistributed net income (loss)		238,918		237,320		1,598		—		(19,880)		(19,743)		(137)		—
Assumed allocation of net income	$	304,731	$	299,361	$	2,042	$	3,328	$	41,479	$	38,898	$	277	$	2,304
Less: Preferred limited partner interest in net income				10,389								8,746
Net income attributable to common limited partners			$	288,972							$	30,152
Denominator:
Basic weighted average common units outstanding				33,932								33,934
Dilutive effect of phantom units				126								291
Diluted weighted average common units outstanding				34,058								34,225
Basic net income per common limited partner unit			$	8.52							$	0.89
Diluted net income per common limited partner unit			$	8.48							$	0.88

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 26, 2022	$	0.5950	March 31, 2022
July 26, 2022	$	0.6050	June 30, 2022
October 25, 2022	$	0.6250	September 30, 2022

The board of directors of the General Partner declared the following quarterly cash distributions on the Series A Preferred Units and the Series B Preferred Units:


	Series A Preferred Units		Series B Preferred Units
	Per Unit Cash		Per Unit Cash		Distribution Declared for the
Cash Distribution Declaration Date	Distribution Declared		Distribution Declared		Quarterly Period Covering
April 18, 2022	$	0.609375	$	0.593750	February 15, 2022 - May 14, 2022
July 18, 2022	$	0.609375	$	0.593750	May 15, 2022 - August 14, 2022
October 17, 2022	$	0.609375	$	0.593750	August 15, 2022 - November 14, 2022

See Note 12, “Partners’ Equity and Cash Distributions” for further information.

Note 15. Changes in Accumulated Other Comprehensive Loss

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


	Pension
Three Months Ended September 30, 2022	Plan
Balance at June 30, 2022	$	(6,355)
Other comprehensive loss		(832)
Amount of (income) loss reclassified from accumulated other comprehensive income (loss)		(236)
Total comprehensive loss		(1,068)
Balance at September 30, 2022	$	(7,423)

Nine Months Ended September 30, 2022
Balance at December 31, 2021	$	(1,902)
Other comprehensive loss		(4,814)
Amount of (income) loss reclassified from accumulated other comprehensive income (loss)		(707)
Total comprehensive loss		(5,521)
Balance at September 30, 2022	$	(7,423)

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.

Note 16. 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 10

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 January 2022, the Partnership was served with a complaint filed in the Middlesex County Superior Court of the Commonwealth of Massachusetts against the Partnership and its wholly owned subsidiaries, Global Companies LLC (“Global Companies”) and Alliance Energy LLC (“Alliance”), alleging, among other things, that a plaintiff truck driver, while (1) loading gasoline and diesel fuel at terminals owned and operated by the Partnership located in Albany, New York and Revere, Massachusetts and (2) unloading gasoline and diesel fuel at gasoline stations owned and/or operated by the Partnership throughout New York, Massachusetts and New Hampshire, contracted aplastic anemia as a result of exposure to benzene-containing products and/or vapors therefrom. The Partnership, Global Companies and Alliance have meritorious defenses to the allegations in the complaint and will vigorously contest the actions taken by the plaintiff.

In October 2020, the Partnership was served with a complaint filed against the Partnership and its wholly owned subsidiary, 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.

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 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.

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 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. The Consent Decree was entered by the Court on December 19, 2019. The Partnership believes that compliance with the Consent Decree and implementation of the requirements of the Consent Decree will have no material impact on its operations.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Partnership received a Subpoena Duces Tecum dated May 13, 2022 from the Office of the Attorney General of the State of New York (“NY AG”) requesting information regarding charges paid by retailers, distributors, or consumers for oil and gas products in or within the proximity of the State of New York during the disruption of the market triggered by Russia’s 2022 invasion of Ukraine. The Partnership has been advised that the NY AG’s office sent similar subpoena requests for information to market participants across the petroleum industry. The Partnership made an initial submission of information to the NY AG’s office and continues to cooperate with the NY AG’s office to satisfy its obligations under the subpoena.

The Partnership received a letter from the Office of the Attorney General of the State of Connecticut (“CT AG”) dated June 28, 2022 seeking information from the Partnership related to its sales of motor fuel to retailers within the State of Connecticut from February 3, 2022 through June 28, 2022. The Partnership has been advised that the CT AG’s office sent similar requests for information to market participants across the petroleum industry. The Partnership has complied with the CT AG’s request and submitted information responsive thereto.

Note 17. New Accounting Standards

There have been no recently issued accounting standards that are expected to have a material impact on the Partnership’s consolidated financial statements.

Note 18. Subsequent Events

Distribution to Common Unitholders—On October 25, 2022, the board of directors of the General Partner declared a quarterly cash distribution of $0.6250 per unit ($2.50 per unit on an annualized basis) for the period from July 1, 2022 through September 30, 2022. On November 14, 2022, the Partnership will pay this cash distribution to its common unitholders of record as of the close of business on November 8, 2022.

Distribution to Series A Preferred Unitholders—On October 17, 2022, 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, 2022 through November 14, 2022. This distribution will be payable on November 15, 2022 to holders of record as of the opening of business on November 1, 2022.

Distribution to Series B Preferred Unitholders—On October 17, 2022, the board of directors of the General Partner declared a quarterly cash distribution of $0.59375 per unit ($2.375 per unit on an annualized basis) on the Series B Preferred Units, covering the period from August 15, 2022 through November 14, 2022. This distribution will be payable on November 15, 2022 to holders of record as of the opening of business on November 1, 2022.

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Item 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 although not all forward-looking statements contain such identifying words. In addition, any statement made by our management concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions by us are also forward-looking statements. Forward-looking statements are not guarantees of performance. Although we believe these forward-looking statements are based on reasonable assumptions, statements made regarding future results are subject to a number of assumptions, uncertainties and risks, many of which are beyond our control, which may cause future results to be materially different from the results stated or implied in this document. These risks and uncertainties include, among other things:

●

We may not have sufficient cash from operations to enable us to pay distributions on the Series A Preferred Units or the Series B Preferred Units (each as defined in Note 12 of Notes to Consolidated Financial Statements) 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.

●

COVID-19 and certain developments in global petroleum markets have had, and may from time to time continue to have, material adverse consequences for general economic, financial and business conditions, and could materially and adversely affect our business, financial condition and results of operation and those of our customers, suppliers and other counterparties.

●	The impact on the global economy and commodity prices resulting from the conflict in Ukraine may have a negative impact on our financial condition and results of operations.

●We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics activities in transporting the products we sell. Implementation of regulations and directives that adversely impact the market for transporting these products by rail or otherwise could adversely affect those activities. In addition, implementation of regulations and directives related to these aforementioned services as well as a disruption in any of these transportation services could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

●We have contractual obligations for certain transportation assets such as railcars, barges and pipelines. A decline in demand for (i) the products we sell or (ii) our logistics activities, which has resulted and could continue to result in a decrease in the utilization of our transportation assets, could negatively impact our financial condition, results of operations and cash available for distribution to our unitholders.

●

We may not be able to fully implement or capitalize upon planned growth projects. Even if we consummate acquisitions or expend capital in pursuit of growth projects that we believe will be accretive, they may in fact result in no increase or even a decrease in cash available for distribution to our unitholders.

●Erosion of the value of major gasoline brands could adversely affect our gasoline sales and customer traffic.

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●Our gasoline sales could be significantly reduced by a reduction in demand due to the impact of COVID-19, higher prices and new technologies and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel-powered motor vehicles. In addition to new technologies and alternative fuel sources, changing consumer preferences or driving habits could lead to new forms of fueling destinations or potentially fewer customer visits to our sites, resulting in a decrease in gasoline sales and/or sales of food, sundries and other on-site services. Any of these outcomes could negatively affect our financial condition, results of operations and cash available for distribution to our unitholders.

●Physical effects from climate change and impacts to areas prone to sea level rise or other extreme weather events could have the potential to adversely affect our assets and operations.

●Changes in government usage mandates and tax credits could adversely affect the availability and pricing of ethanol and renewable fuels, which could negatively impact our sales.

●Our petroleum and related products sales, logistics activities, convenience store operations and results of operations have been and could continue to be adversely affected by, among other things, changes in the petroleum products market structure, product differentials and volatility (or lack thereof), implementation of regulations that adversely impact the market for transporting petroleum and related products by rail and other modes of transportation, severe weather conditions, significant changes in prices, labor shortages and interruptions in transportation services and other necessary services and equipment, such as railcars, barges, trucks, loading equipment and qualified drivers.

●Our risk management policies cannot eliminate all commodity risk, basis risk or the impact of unfavorable market conditions, each of which can adversely affect our financial condition, results of operations and cash available for distribution to our unitholders. In addition, noncompliance with our risk management policies could result in significant financial losses.

●Our results of operations are affected by the overall forward market for the products we sell, and pricing volatility may adversely impact our results.

●Our businesses could be affected by a range of issues, such as changes in demand, commodity prices, energy conservation, competition, the global economic climate, movement of products between foreign locales and within the United States, changes in refiner demand, weekly and monthly refinery output levels, changes in the rate of inflation or deflation, changes in local, domestic and worldwide inventory levels, changes in health, safety and environmental regulations, including, without limitation, those related to climate change, failure to obtain permits, amend existing permits for expansion and/or to address changes to our assets and underlying operations, or renew existing permits on terms favorable to us, seasonality, supply, weather and logistics disruptions and other factors and uncertainties inherent in the transportation, storage, terminalling and marketing of refined products, gasoline blendstocks, renewable fuels and crude oil.

●Increases and/or decreases in the prices of the products we sell could adversely impact the amount of availability for borrowing working capital under our credit agreement, which credit agreement has borrowing base limitations and advance rates.

●Warmer weather conditions could adversely affect our home heating oil and residual oil sales. Our sales of home heating oil and residual oil continue to be reduced by conversions to natural gas and by utilization of propane and/or natural gas (instead of heating oil) as primary fuel sources.

●We are exposed to trade credit risk and risk associated with our trade credit support in the ordinary course of our businesses.

●	The condition of credit markets may adversely affect our liquidity.

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●

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 our ability to service our indebtedness.

●	Our gasoline station and convenience store business could expose us to an increase in consumer litigation and result in an unfavorable outcome or settlement of one or more lawsuits where insurance proceeds are insufficient or otherwise unavailable.

●

Congress has given the Food and Drug Administration (“FDA”) broad authority to regulate tobacco and nicotine products, and the FDA, states and some municipalities have enacted and are pursuing enaction of numerous regulations restricting the sale of such products. These governmental actions, as well as national, state and municipal campaigns to discourage smoking, tax increases, and imposition of regulations restricting the sale of flavored tobacco products, 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 flavored tobacco products, e-cigarettes and vapor products may offset some of the gains we have experienced from selling these types of products. These factors could materially affect the sale of this product mix which in turn could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

●Our results can be adversely affected by unforeseen events, such as adverse weather, natural disasters, terrorism, cyber attacks, pandemics, or other catastrophic events which could have an adverse effect on our financial condition, results of operations and cash available for distributions to our unitholders.

●	Our businesses could expose us to litigation and result in an unfavorable outcome or settlement of one or more lawsuits where insurance proceeds are insufficient or otherwise unavailable.

●Adverse developments in the areas where we conduct our businesses could have a material adverse effect on such businesses and could reduce our ability to make distributions to our unitholders.

●A serious disruption to our information technology systems could significantly limit our ability to manage and operate our businesses efficiently.

●We are exposed to performance risk in our supply chain.

●Our businesses are subject to federal, state and municipal environmental and non-environmental regulations which could have a material adverse effect on such businesses.

●Our general partner and its affiliates have conflicts of interest and limited fiduciary duties, which could permit them to favor their own interests to the detriment of our unitholders.

●Unitholders have limited voting rights and are not entitled to elect our general partner or its directors or remove our general partner without the consent of the holders of at least 66 2/3% of the outstanding common units (including common units held by our general partner and its affiliates), which could lower the trading price of our units.

●Our tax treatment depends on our status as a partnership for federal income tax purposes.

●Unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.

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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, 2021 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.

Overview

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 the region’s largest independent owners, suppliers and operators of gasoline stations and convenience stores. As of September 30, 2022, we had a portfolio of 1,684 owned, leased and/or supplied gasoline stations, including 356 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 region of the United States and Canada.

Collectively, we sold approximately $4.4 billion and $14.0 billion of refined petroleum products, gasoline blendstocks, renewable fuels and crude oil for the three and nine months ended September 30, 2022, respectively. In addition, we had other revenues of approximately $0.2 billion and $0.4 billion for the three and nine months ended September 30, 2022, respectively, from convenience store and prepared food 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.

COVID-19

Although the impact of COVID-19 has declined to date, it continues to make its presence felt in our corporate offices, at our retail sites and terminal locations and in the global supply chain. We continue to monitor these impacts while providing essential products and services, prioritizing the safety of our employees, customers and vendors in the communities where we operate.

COVID-19 resulted in an economic downturn, restricted travel to, from and within the states in which we conduct our businesses, and in decreases in the demand for gasoline and convenience store products. While market conditions have improved, COVID-19 may continue to impact our operations and financial performance, and uncertainties surrounding the duration of COVID-19 and demand at the pump, inside our stores and at our terminals remain.

The extent to which COVID-19 may continue to affect our operating results remains uncertain. COVID-19 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.

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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 petroleum markets resulting from COVID-19 and geopolitical events may impact our results.

Business operations today reflect changes which may remain for an indefinite period of time. In these uncertain times and volatile markets, we believe that we are operationally nimble and that our portfolio of assets will continue to provide us with opportunities.

2022 Events

Acquisition from Tidewater Convenience, Inc.—On September 20, 2022, we acquired substantially all of the assets from Tidewater Convenience, Inc. (“Tidewater”) for approximately $40.4 million, including inventory, funded with borrowings under our revolving credit facility. The acquisition includes 14 company-operated Tidewater convenience stores and 1 fuel site, all located in Virginia.

Sale of the Revere Terminal—On June 28, 2022, we completed the sale of our terminal located on Boston Harbor in Revere, Massachusetts for a purchase price of $150.0 million in cash. See Note 11 of Notes to Consolidated Financial Statements.

Amendments to the Credit Agreement—On March 9, 2022, we and certain of our subsidiaries entered into the sixth amendment to third amended and restated credit agreement which, among other things, increased the total aggregate commitment to $1.55 billion. On March 30, 2022, we and certain of our subsidiaries entered into the seventh amendment to third amended and restated credit agreement which, among other things, refreshed the accordion feature under the credit agreement. See “—Liquidity and Capital Resources—Credit Agreement.”

Acquisition from Miller Oil Co., Inc.—On February 1, 2022, we acquired substantially all of the retail motor fuel assets from Miller Oil Co., Inc. (“Miller Oil”) for approximately $60.1 million, including inventory, funded with borrowings under our revolving credit facility. The acquisition includes 21 company-operated Miller’s Neighborhood Market convenience stores and 2 fuel sites that are either owned or leased, including lessee dealer and commissioned agent locations, all located in Virginia, and 34 fuel supply only sites, primarily in Virginia. See Note 2 of Notes to Consolidated Financial Statements.

Acquisition from Consumers Petroleum of Connecticut Incorporated—On January 25, 2022, we acquired substantially all of the assets from Consumers Petroleum of Connecticut, Incorporated (“Consumers Petroleum”) for approximately $154.7 million, including inventory, funded with borrowings under our revolving credit facility. The acquisition includes 26 company-owned Wheels convenience stores and related fuel operations located in Connecticut and 22 fuel-supply only sites located in Connecticut and New York. See Note 2 of Notes to Consolidated Financial Statements.

Operating Segments

We purchase refined petroleum products, gasoline blendstocks, renewable fuels and crude oil primarily from domestic and foreign refiners and ethanol producers, crude oil producers, major and independent oil companies and trading companies. We operate our businesses under three segments: (i) Wholesale, (ii) Gasoline Distribution and Station Operations (“GDSO”) and (iii) Commercial.

Wholesale

In our Wholesale segment, we engage in the logistics of selling, gathering, blending, storing and transporting refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane. We transport these products by railcars, barges, trucks and/or pipelines pursuant to spot or long-term contracts. From time to time, we aggregate crude oil by truck or pipeline in the mid-continent region 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 and residual oil to home heating oil retailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to take delivery of the gasoline, distillates and propane at bulk terminals and inland storage facilities that we own or control or at which we have throughput or exchange arrangements. Ethanol is shipped primarily by rail and by barge.

In our Wholesale segment, we obtain Renewable Identification Numbers (“RIN”) in connection with our purchase of ethanol which is used for bulk trading purposes or for blending with gasoline through our terminal system. A RIN is a renewable identification number associated with government-mandated renewable fuel standards. To evidence that the required volume of renewable fuel is blended with gasoline, obligated parties must retire sufficient RINs to cover their 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 store and prepared food sales, (ii) rental income from gasoline stations leased to dealers, from commissioned agents and from cobranding arrangements and (iii) sundries (such as car wash sales and lottery and ATM commissions).

As of September 30, 2022, we had a portfolio of owned, leased and/or supplied gasoline stations, primarily in the Northeast, that consisted of the following:


Company operated	356
Commissioned agents	293
Lessee dealers	196
Contract dealers	839
Total	1,684

At our company-operated stores, we operate the gasoline stations and convenience stores with our employees, and we set the retail price of gasoline at the station. At commissioned agent locations, we own the gasoline inventory, and we set the retail price of gasoline at the station and pay the commissioned agent a fee related to the gallons sold. We receive rental income from commissioned agent leased gasoline stations for the leasing of the convenience store premises, repair bays and/or other businesses that may be conducted by the commissioned agent. At dealer-leased locations, the dealer purchases gasoline from us, and the dealer sets the retail price of gasoline at the dealer’s station. We also receive rental income from (i) dealer-leased gasoline stations and (ii) cobranding arrangements. We also supply gasoline to locations owned and/or leased by independent contract dealers. Additionally, we have contractual relationships with distributors in certain New England states pursuant to which we source and supply these distributors’ gasoline stations with ExxonMobil-branded gasoline.

Commercial

In our Commercial segment, we include sales and deliveries to end user customers in the public sector and to large commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and bunker fuel. In the case of public sector commercial and industrial end user customers, we sell products primarily either through a competitive bidding process or through contracts of various terms. We respond to publicly issued requests for product proposals and quotes. We generally arrange for the delivery of the product to the customer’s designated location. Our Commercial segment also includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity.

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Seasonality

Due to the nature of our businesses and our reliance, in part, on consumer travel and spending patterns, we may experience more demand for gasoline during the late spring and summer months than during the fall and winter months. Travel and recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for gasoline. Therefore, our volumes in gasoline are typically higher in the second and third quarters of the calendar year. However, COVID-19 has had a negative impact on gasoline demand and the extent and duration of that impact remains uncertain. As demand for some of our refined petroleum products, specifically home heating oil and residual oil for space heating purposes, is generally greater during the winter months, heating oil and residual oil volumes are generally higher during the first and fourth quarters of the calendar year. These factors may result in fluctuations in our quarterly operating results.

Outlook

This section identifies certain risks and certain economic or industry-wide factors, in addition to those described under “—COVID-19,” that may affect our financial performance and results of operations in the future, both in the short-term and in the long-term. Our results of operations and financial condition depend, in part, upon the following:

●

Our businesses are influenced by the overall markets for refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane and increases and/or decreases in the prices of these products may adversely impact our financial condition, results of operations and cash available for distribution to our unitholders and the amount of borrowing available for working capital under our credit agreement. Results from our purchasing, storing, terminalling, transporting, selling and blending operations are influenced by prices for refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane, price volatility and the market for such products. Prices in the overall markets for these products may affect our financial condition, results of operations and cash available for distribution to our unitholders. Our margins can be significantly impacted by the forward product pricing curve, often referred to as the futures market. We typically hedge our exposure to petroleum product and renewable fuel price moves with futures contracts and, to a lesser extent, swaps. In markets where future prices are higher than current prices, referred to as contango, we may use our storage capacity to improve our margins by storing products we have purchased at lower prices in the current market for delivery to customers at higher prices in the future. In markets where future prices are lower than current prices, referred to as backwardation, inventories can depreciate in value and hedging costs are more expensive. For this reason, in these backward markets, we attempt to reduce our inventories in order to minimize these effects. Our inventory management is dependent on the use of hedging instruments which are managed based on the structure of the forward pricing curve. Daily market changes may impact periodic results due to the point-in-time valuation of these positions. Volatility in petroleum markets may impact our results. When prices for the products we sell rise, some of our customers may have insufficient credit to purchase supply from us at their historical purchase volumes, and their customers, in turn, may adopt conservation measures which reduce consumption, thereby reducing demand for product. Furthermore, when prices increase rapidly and dramatically, we may be unable to promptly pass our additional costs on to our customers, resulting in lower margins which could adversely affect our results of operations. Higher prices for the products we sell may (1) diminish our access to trade credit support and/or cause it to become more expensive and (2) decrease the amount of borrowings available for working capital under our credit agreement as a result of total available commitments, borrowing base limitations and advance rates thereunder. When prices for the products we sell decline, our exposure to risk of loss in the event of nonperformance by our customers of our forward contracts may be increased as they and/or their customers may breach their contracts and purchase the products we sell at the then lower market price from a competitor.

●

We commit substantial resources to pursuing acquisitions and expending capital for growth projects, although there is no certainty that we will successfully complete any acquisitions or growth projects or receive the economic results we anticipate from completed acquisitions or growth projects. We are continuously engaged in discussions with potential sellers and lessors of existing (or suitable for development) terminalling, storage, logistics and/or marketing assets, including gasoline stations, convenience stores and related businesses, and also consider organic growth projects. Our growth largely depends on our ability to make accretive acquisitions and/or

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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. Many of these transactions involve numerous regulatory, environmental, commercial and legal uncertainties beyond our control. 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. In addition, we may consummate transactions that 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 could require us to provide collateral. In addition, we could experience a tightening of trade credit from our suppliers.

●

We depend upon marine, pipeline, rail and truck transportation services for a substantial portion of our logistics activities in transporting the products we sell. Implementation of regulations and directives related to these aforementioned services as well as disruption in any of these transportation services could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders. Hurricanes, flooding and other severe weather conditions could cause a disruption in the transportation services we depend upon and could affect the flow of service. In addition, accidents, labor disputes between providers and their employees and labor renegotiations, including strikes, lockouts or a work stoppage, shortage of railcars, trucks and barges, mechanical difficulties or bottlenecks and disruptions in transportation logistics could also disrupt our business operations. These events could result in service disruptions and increased costs which could also adversely affect our financial condition, results of operations and cash available for distribution to our unitholders. Other disruptions, such as those due to an act of terrorism or war, could also adversely affect our businesses.

●

We have contractual obligations for certain transportation assets such as railcars, barges and pipelines. A decline in demand for (i) the products we sell or (ii) our logistics activities, could result in a decrease in the utilization of our transportation assets, which could negatively impact our financial condition, results of operations and cash available for distribution to our unitholders.

●

Our gasoline financial results in our GDSO segment can be lower in the first and fourth quarters of the calendar year due to seasonal fluctuations in demand. Due to the nature of our businesses and our reliance, in part, on consumer travel and spending patterns, we may experience more demand for gasoline during the late spring and summer months than during the fall and winter months. Travel and recreational activities are typically higher in these months in the geographic areas in which we operate, increasing the demand for gasoline. Therefore, our results of operations in gasoline can be lower in the first and fourth quarters of the calendar year. COVID-19 has had a negative impact on gasoline demand and in-store traffic, and the extent and duration of that impact remains uncertain.

●

Our heating oil and residual oil financial results can be lower in the second and third quarters of the calendar year. Demand for some refined petroleum products, specifically home heating oil and residual oil for space heating purposes, is generally higher during November through March than during April through October. We obtain a significant portion of these sales during the winter months.

●

Warmer weather conditions could adversely affect our results of operations and financial condition. Weather conditions generally have an impact on the demand for both home heating oil and residual oil. Because we supply distributors whose customers depend on home heating oil and residual oil for space heating purposes during the winter, warmer-than-normal temperatures during the first and fourth calendar quarters can decrease the total volume we sell and the gross profit realized on those sales.

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●Our gasoline, convenience store and prepared food sales could be significantly reduced by a reduction in demand due to the impact of COVID-19, higher prices and new technologies and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel-powered motor vehicles. Technological advances and alternative fuel sources, such as electric, hybrid, battery powered, hydrogen or other alternative fuel-powered motor vehicles, may adversely affect the demand for gasoline. We could face additional competition from alternative energy sources as a result of future government-mandated controls or regulations which promote the use of alternative fuel sources. A number of new legal incentives and regulatory requirements, and executive initiatives, including various government subsidies including the extension of certain tax credits for renewable energy, have made these alternative forms of energy more competitive. Changing consumer preferences or driving habits could lead to new forms of fueling destinations or potentially fewer customer visits to our sites, resulting in a decrease in gasoline sales and/or sales of food, sundries and other on-site services. In addition, higher prices could reduce the demand for gasoline and the products and services we offer at our convenience stores and adversely impact our sales. A reduction in our sales could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

●

Energy efficiency, higher prices, new technology and alternative fuels could reduce demand for our heating oil and residual oil. Increased conservation and technological advances have adversely affected the demand for home heating oil and residual oil. Consumption of residual oil has steadily declined over the last four decades. We could face additional competition from alternative energy sources as a result of future government-mandated controls or regulations further promoting the use of cleaner fuels. End users who are dual-fuel users have the ability to switch between residual oil and natural gas. Other end users may elect to convert to natural gas or other alternative fuels. 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 or other alternative fuels. 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 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 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 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. Changes proposed by EPA for the renewable volume obligations may increase the cost to consumers for transportation fuel, which could result in a decline in demand for fuels and lower revenues for our business.

●

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, states and some municipalities have enacted and are pursuing enaction of

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numerous regulations restricting the sale of such products. These governmental actions, as well as national, state and municipal campaigns to discourage smoking, tax increases, and imposition of regulations restricting the sale of flavored tobacco products, 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 flavored tobacco products, e-cigarettes and vapor products may offset some of the gains we have experienced from selling these types of products. These factors could materially affect the sale of this product mix which in turn could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

●

New, stricter environmental laws and other industry-related regulations or environmental litigation could significantly impact our operations and/or increase our costs, which could adversely affect our results of operations and financial condition. Our operations are subject to federal, state and municipal laws and regulations regulating, among other matters, logistics activities, product quality specifications and other environmental matters. The trend in environmental regulation has been towards more restrictions and limitations on activities that may affect the environment over time. For example, President Biden signed an executive order calling for new or more stringent emissions standards for new, modified and existing oil and gas facilities. Our businesses may be adversely affected by increased costs and liabilities resulting from such stricter laws and regulations. We try to anticipate future regulatory requirements that might be imposed and plan accordingly to remain in compliance with changing environmental laws and regulations and to minimize the costs of such compliance. Risks related to our environmental permits, including the risk of noncompliance, permit interpretation, permit modification, renewal of permits on less favorable terms, judicial or administrative challenges to permits by citizens groups or federal, state or municipal entities or permit revocation are inherent in the operation of our businesses, as it is with other companies engaged in similar businesses. We may not be able to renew the permits necessary for our operations, or we may be forced to accept terms in future permits that limit our operations or result in additional compliance costs. There can be no assurances as to the timing and type of such changes in existing laws or the promulgation of new laws or the amount of any required expenditures associated therewith. Climate change continues to attract considerable public and scientific attention. In recent years environmental interest groups have filed suit against companies in the energy industry related to climate change. Should such suits succeed, we could face additional compliance costs or litigation risks.

Results of Operations

Evaluating Our Results of Operations

Our management uses a variety of financial and operational measurements to analyze our performance. These measurements include: (1) product margin, (2) gross profit, (3) earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA, (4) distributable cash flow, (5) selling, general and administrative expenses (“SG&A”), (6) operating expenses and (7) degree days.

Product Margin

We view product margin as an important performance measure of the core profitability of our operations. We review product margin monthly for consistency and trend analysis. We define product margin as our product sales minus product costs. Product sales primarily include sales of unbranded and branded gasoline, distillates, residual oil, renewable fuels and crude oil, as well as convenience store and prepared food sales, gasoline station rental income and revenue generated from our logistics activities when we engage in the storage, transloading and shipment of products owned by others. Product costs include the cost of acquiring products and all associated costs including shipping and handling costs to bring such products to the point of sale as well as product costs related to convenience store items and costs associated with our logistics activities. We also look at product margin on a per unit basis (product margin divided by volume). Product margin is a non-GAAP financial measure used by management and external users of our consolidated financial statements to assess our business. Product margin should not be considered an alternative to net income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with GAAP. In addition, our product margin may not be comparable to product margin or a similarly titled measure of other companies.

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Gross Profit

We define gross profit as our product margin minus terminal and gasoline station related depreciation expense allocated to cost of sales.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures used as supplemental financial measures by management and may be used by external users of our consolidated financial statements, such as investors, commercial banks and research analysts, to assess:

●	our compliance with certain financial covenants included in our debt agreements;

●	our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;

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

●

our operating performance and return on invested capital as compared to those of other companies in the wholesale, marketing, storing and distribution of refined petroleum products, gasoline blendstocks, renewable fuels, crude oil and propane, and in the gasoline stations and convenience stores business, without regard to financing methods and capital structure; and

●	the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.

Adjusted EBITDA is EBITDA further adjusted for gains or losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges. EBITDA and Adjusted EBITDA should not be considered as alternatives to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA exclude some, but not all, items that affect net income, and these measures may vary among other companies. Therefore, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Distributable Cash Flow

Distributable cash flow is an important non-GAAP financial measure for our limited partners since it serves as an indicator of our success in providing a cash return on their investment. Distributable cash flow as defined by our partnership agreement is net income plus depreciation and amortization minus maintenance capital expenditures, as well as adjustments to eliminate items approved by the audit committee of the board of directors of our general partner that are extraordinary or non-recurring in nature and that would otherwise increase distributable cash flow.

Distributable cash flow as used in our partnership agreement also determines our ability to make cash distributions on our incentive distribution rights. The investment community also uses a distributable cash flow metric similar to the metric used in our partnership agreement with respect to publicly traded partnerships to indicate whether or not such partnerships have generated sufficient earnings on a current or historic level that can sustain distributions on preferred or common units or support an increase in quarterly cash distributions on common units. Our partnership agreement does not permit adjustments for certain non-cash items, such as net losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges.

Distributable cash flow should not be considered as an alternative to net income, operating income, cash flow from operations, or any other measure of financial performance presented in accordance with GAAP. In addition, our distributable cash flow may not be comparable to distributable cash flow or similarly titled measures of other companies.

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Selling, General and Administrative Expenses

Our SG&A expenses include, among other things, marketing costs, corporate overhead, employee salaries and benefits, pension and 401(k) plan expenses, discretionary bonuses, non-interest financing costs, professional fees and information technology expenses. Employee-related expenses including employee salaries, discretionary bonuses and related payroll taxes, benefits, and pension and 401(k) plan expenses are paid by our general partner which, in turn, are reimbursed for these expenses by us.

Operating Expenses

Operating expenses are costs associated with the operation of the terminals, transload facilities and gasoline stations and convenience stores used in our businesses. Lease payments, maintenance and repair, property taxes, utilities, credit card fees, taxes, labor and labor-related expenses comprise the most significant portion of our operating expenses. While the majority of these expenses remains relatively stable, independent of the volumes through our system, they can fluctuate depending on the activities performed during a specific period. In addition, they can be impacted by new directives issued by federal, state and local governments.

Degree Days

A “degree day” is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how far the average temperature departs from a human comfort level of 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a long-term (multi-year) average, or normal, to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by 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,
	2022		2021		2022		2021
Net income	$	111,439	$	33,637	$	304,731	$	41,479
EBITDA (1)(3)	$	168,217	$	79,375	$	459,818	$	178,779
Adjusted EBITDA (1)(3)	$	168,509	$	79,183	$	378,350	$	178,292
Distributable cash flow (2)(3)(4)	$	128,020	$	49,697	$	356,086	$	90,274
Wholesale Segment:
Volume (gallons)		779,175		813,411		2,548,607		2,642,437
Sales
Gasoline and gasoline blendstocks	$	1,623,599	$	1,371,621	$	5,046,457	$	3,696,677
Other oils and related products (5)		886,877		451,172		3,242,031		1,641,250
Crude oil (6)		90		13,194		2,272		47,128
Total	$	2,510,566	$	1,835,987	$	8,290,760	$	5,385,055
Product margin
Gasoline and gasoline blendstocks	$	54,260	$	22,458	$	93,009	$	62,379
Other oils and related products (5)		25,716		22,625		130,690		54,580
Crude oil (6)		(646)		(2,814)		(6,706)		(10,662)
Total	$	79,330	$	42,269	$	216,993	$	106,297
Gasoline Distribution and Station Operations Segment:
Volume (gallons)		430,001		416,778		1,228,769		1,146,001
Sales
Gasoline	$	1,631,078	$	1,151,251	$	4,721,475	$	2,930,446
Station operations (7)		158,953		134,126		419,159		357,452
Total	$	1,790,031	$	1,285,377	$	5,140,634	$	3,287,898
Product margin
Gasoline	$	187,994	$	112,446	$	432,732	$	294,001
Station operations (7)		73,614		65,269		200,719		176,567
Total	$	261,608	$	177,715	$	633,451	$	470,568
Commercial Segment:
Volume (gallons)		102,092		101,157		314,288		251,070
Sales	$	326,150	$	202,546	$	1,019,541	$	483,429
Product margin	$	10,389	$	3,916	$	31,042	$	10,807
Combined sales and product margin:
Sales	$	4,626,747	$	3,323,910	$	14,450,935	$	9,156,382
Product margin (8)	$	351,327	$	223,900	$	881,486	$	587,672
Depreciation allocated to cost of sales		(22,948)		(20,842)		(65,393)		(61,537)
Combined gross profit	$	328,379	$	203,058	$	816,093	$	526,135

GDSO portfolio as of September 30, 2022 and 2021:		2022		2021
Company operated		356		295
Commissioned agents		293		291
Lessee dealers		196		203
Contract dealers		839		808
Total GDSO portfolio		1,684		1,597

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	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Weather conditions:
Normal heating degree days		96			96			3,750			3,750
Actual heating degree days		57			21			3,482			3,311
Variance from normal heating degree days		(41)	%		(78)	%		(7)	%		(12)	%
Variance from prior period actual heating degree days		171	%		(71)	%		5	%		—	%

(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)

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.

(3)

EBITDA, Adjusted EBITDA and distributable cash flow for each of the three and nine months ended September 30, 2021 include a $3.1 million expense for compensation resulting from the retirement of our former chief financial officer in August of 2021. EBITDA, Adjusted EBITDA and distributable cash flow for the nine months ended September 30, 2021 include a $6.6 million expense for compensation and benefits resulting from the passing of our general counsel in May of 2021. This expense relates to contractual commitments including the acceleration of grants previously awarded as well as a discretionary award in recognition of service.

(4)

Distributable cash flow includes a net gain on sale and disposition of assets of $81.5 million for the nine months ended September 30, 2022, primarily related to the sale of the Revere Terminal (see Note 11 of Notes to Consolidated Financial Statements). The respective net (loss) gain on sale and disposition of assets for the three months ended September 30, 2022 and for each of the three and nine months ended September 30, 2021 was immaterial.

(5)	Other oils and related products primarily consist of distillates and residual oil.

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

(7)	Station operations consist of convenience store and prepared food sales, rental income and sundries.

(8)	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,
	2022		2021		2022		2021
Reconciliation of net income to EBITDA and Adjusted EBITDA:
Net income	$	111,439	$	33,637	$	304,731	$	41,479
Depreciation and amortization		26,920		25,692		78,572		76,172
Interest expense		19,047		19,660		61,577		60,339
Income tax expense		10,811		386		14,938		789
EBITDA (1)		168,217		79,375		459,818		178,779
Net loss (gain) on sale and disposition of assets		292		(192)		(81,468)		(675)
Long-lived asset impairment		—		—		—		188
Adjusted EBITDA (1)	$	168,509	$	79,183	$	378,350	$	178,292

Reconciliation of net cash provided by (used in) operating activities to EBITDA and Adjusted EBITDA:
Net cash provided by (used in) operating activities	$	191,713	$	152,615	$	576,906	$	99,057
Net changes in operating assets and liabilities and certain non-cash items		(53,354)		(93,286)		(193,603)		18,594
Interest expense		19,047		19,660		61,577		60,339
Income tax expense		10,811		386		14,938		789
EBITDA (1)		168,217		79,375		459,818		178,779
Net loss (gain) on sale and disposition of assets		292		(192)		(81,468)		(675)
Long-lived asset impairment		—		—		—		188
Adjusted EBITDA (1)	$	168,509	$	79,183	$	378,350	$	178,292

(1)

EBITDA and Adjusted EBITDA for each of the three and nine months ended September 30, 2021 include a $3.1 million expense for compensation resulting from the retirement of our former chief financial officer in August of 2021. EBITDA and Adjusted EBITDA for the nine months ended September 30, 2021 include a $6.6 million expense for compensation and benefits resulting from the passing of our general counsel in May of 2021. This expense relates to contractual commitments including the acceleration of grants previously awarded as well as a discretionary award in recognition of service.

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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,
	2022		2021		2022		2021
Reconciliation of net income to distributable cash flow:
Net income	$	111,439	$	33,637	$	304,731	$	41,479
Depreciation and amortization		26,920		25,692		78,572		76,172
Amortization of deferred financing fees		1,347		1,211		4,084		3,810
Amortization of routine bank refinancing fees		(1,138)		(1,002)		(3,457)		(3,052)
Maintenance capital expenditures		(10,548)		(9,841)		(27,844)		(28,135)
Distributable cash flow (1)(2)(3)		128,020		49,697		356,086		90,274
Distributions to preferred unitholders (4)		(3,463)		(3,463)		(10,389)		(8,746)
Distributable cash flow after distributions to preferred unitholders	$	124,557	$	46,234	$	345,697	$	81,528

Reconciliation of net cash provided by (used in) operating activities to distributable cash flow:
Net cash provided by (used in) operating activities	$	191,713	$	152,615	$	576,906	$	99,057
Net changes in operating assets and liabilities and certain non-cash items		(53,354)		(93,286)		(193,603)		18,594
Amortization of deferred financing fees		1,347		1,211		4,084		3,810
Amortization of routine bank refinancing fees		(1,138)		(1,002)		(3,457)		(3,052)
Maintenance capital expenditures		(10,548)		(9,841)		(27,844)		(28,135)
Distributable cash flow (1)(2)(3)		128,020		49,697		356,086		90,274
Distributions to preferred unitholders (4)		(3,463)		(3,463)		(10,389)		(8,746)
Distributable cash flow after distributions to preferred unitholders	$	124,557	$	46,234	$	345,697	$	81,528

(1)

(2)

(3)

Distributable cash flow for each of the three and nine months ended September 30, 2021 includes a $3.1 million expense for compensation resulting from the retirement of our former chief financial officer in August of 2021 Distributable cash flow for the nine months ended September 30, 2021 includes a $6.6 million expense for compensation and benefits resulting from the passing of our general counsel in May of 2021. This expense relates to contractual commitments including the acceleration of grants previously awarded as well as a discretionary award in recognition of service.

(4)

Distributions to preferred unitholders represent the distributions payable to the Series A preferred unitholders and the Series B preferred unitholders earned during the period. These distributions are cumulative and payable quarterly in arrears on February 15, May 15, August 15 and November 15 of each year.

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Results of Operations

Consolidated Sales

Our total sales were $4.6 billion and $3.3 billion for the three months ended September 30, 2022 and 2021, respectively, an increase of $1.3 billion, or 39%, primarily due to an increase in prices. Our aggregate volume of product sold was 1.3 billion gallons for each of the three months ended September 30, 2022 and 2021.

Our total sales were $14.4 billion and $9.1 billion for the nine months ended September 30, 2022 and 2021, respectively, an increase of $5.3 billion, or 58%, primarily due to increases in prices and, to a lesser extent, volume sold. Our aggregate volume of product sold was 4.1 billion gallons and 4.0 billion gallons for the nine months ended September 30, 2022 and 2021, respectively, increasing 52 million gallons (consisting of increases of 83 million gallons and 63 million gallons in our GDSO and Commercial segments, respectively, offset by a decrease of 94 million gallons in our Wholesale segment due to decreased volume in gasoline and gasoline blendstocks and crude oil, offset by an increase in other oils and related products).

Gross Profit

Our gross profit was $328.4 million and $203.1 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $125.3 million, or 62%. In our GDSO segment, our gasoline distribution product margin increased due to higher fuel margins (cents per gallon) and higher volume in part due to the acquisitions of Miller Oil and Consumers Petroleum (collectively the “Recent Acquisitions”). Our station operations product margin increased due to increased activity at our convenience stores, also partially due to the Recent Acquisitions. In our Wholesale segment, our product margins in gasoline and gasoline blendstocks and in other oils and related products benefitted from more favorable market conditions. In our Commercial segment, our product margin increased largely due to an increase in bunkering activity.

Our gross profit was $816.1 million and $526.1 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $290.0 million, or 55%. In our GDSO segment, our gasoline distribution product margin increased due to higher fuel margins (cents per gallon) and higher volume in part due to the Recent Acquisition. Our station operations product margin increased due to increased activity at our convenience stores, also partially due to the Recent Acquisitions. Our Wholesale segment product margins in gasoline and gasoline blendstocks and in other oils and related products increased largely due to more favorable market conditions. In our Commercial segment, our product margin increased largely due to an increase in bunkering activity.

Results for Wholesale Segment

Gasoline and Gasoline Blendstocks. Sales from wholesale gasoline and gasoline blendstocks were $1.6 billion and $1.3 billion for the three months ended September 30, 2022 and 2021, respectively, increasing $252.0 million, or 18%, primarily due to an increase in prices, partially offset by a decline in volume sold. Our gasoline and gasoline blendstocks product margin was $54.2 million and $22.5 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $31.7 million, or 141%, primarily due to more favorable market conditions in gasoline.

Sales from wholesale gasoline and gasoline blendstocks were $5.0 billion and $3.7 billion for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1.3 billion, or 35%, primarily due to an increase in prices, partially offset by a decline in volume sold. Our gasoline and gasoline blendstocks product margin was $93.0 million and $62.4 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $30.6 million, or 49%, primarily due to more favorable market conditions in gasoline during the second and third quarters of 2022.

Other Oils and Related Products. Sales from other oils and related products (primarily distillates and residual oil) were $886.9 million and $451.2 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $435.7 million, or 97%, primarily due to an increase in distillate prices and to higher residual oil volume sold. Our product margin from other oils and related products was $25.7 million and $22.6 million for the three months ended

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September 30, 2022 and 2021, respectively, an increase of $3.1 million, or 14%, primarily due to more favorable market conditions in distillates.

Sales from other oils and related products were $3.2 billion and $1.6 billion for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1.6 billion, or 100%, primarily due to an increase in distillate prices and to higher distillate and residual volume sold. Our product margin from other oils and related products was $130.7 million and $54.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $76.1 million, or 139%, primarily due to more favorable market conditions.

Crude Oil. Crude oil sales and logistics revenues were $0.1 million and $13.2 million for the three months ended September 30, 2022 and 2021, respectively, a decrease of $13.1 million, or 99%, due to a decrease in volume sold. Our crude oil product margin was ($0.6 million) and ($2.8 million) for the three months ended September 30, 2022 and 2021, respectively, an increase of $2.2 million, or 78%, primarily due to the expiration of a pipeline connection agreement in August of 2021.

Crude oil sales and logistics revenues were $2.3 million and $47.1 million for the nine months ended September 30, 2022 and 2021, respectively, a decrease of $44.8 million, or 95%, primarily due to a decrease in volume sold. Our crude oil product margin was ($6.7 million) and ($10.7 million) for the nine months ended September 30, 2022 and 2021, respectively, an increase of $4.0 million, or 37%, primarily due to the expiration of a pipeline connection agreement in August of 2021.

Results for Gasoline Distribution and Station Operations Segment

Gasoline Distribution. Sales from gasoline distribution were $1.6 billion and $1.2 billion for the three months ended September 30, 2022 and 2021, respectively, increasing $479.8 million, or 42%, primarily due to an increase in prices and an increase in volume sold in part due to the Recent Acquisitions. Our product margin from gasoline distribution was $188.0 million and $112.4 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $75.6 million, or 67%, primarily due to higher fuel margins (cents per gallon) and an increase in volume sold due to the Recent Acquisitions.

Sales from gasoline distribution were $4.7 billion and $2.9 billion for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1.8 billion, or 62%, primarily due to an increase in prices and an increase in volume sold in part due to the Recent Acquisitions. Our product margin from gasoline distribution was $432.7 million and $294.0 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $138.7 million, or 47%, primarily due to higher fuel margins (cents per gallon) and an increase in volume sold in part due to the Recent Acquisitions.

Station Operations. Our station operations, which include (i) convenience store and prepared food 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 $158.9 million and $134.1 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $24.8 million, or 18%. Our product margin from station operations was $73.6 million and $65.3 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $8.3 million, or 13%. The increases in sales and product margin are primarily due to an increase in activity at our convenience stores, in part due to the Recent Acquisitions.

Sales from our station operations were $419.1 million and $357.4 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $61.7 million, or 17%. Our product margin from station operations was $200.7 million and $176.6 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $24.1 million, or 14%. The increases in sales and product margin are primarily due to an increase in activity at our convenience stores, in part due to the Recent Acquisitions.

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Results for Commercial Segment

Our commercial sales were $326.1 million and $202.5 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $123.6 million or 61%, primarily due to an increase in prices. Our commercial product margin was $10.4 million and $3.9 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $6.5 million, or 166%. The increases in sales and product margin are largely due to an increase in bunkering activity.

Our commercial sales were $1.0 billion and $0.5 billion for the nine months ended September 30, 2022 and 2021, respectively, increasing $536.1 million or 111%, due to increases in prices and volume sold. Our commercial product margin was $31.0 million and $10.8 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $20.2 million, or 187%. The increases in sales and product margin are largely due to an increase in bunkering activity.

Selling, General and Administrative Expenses

SG&A expenses were $65.1 million and $54.7 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $10.4 million, or 19%, including increases of $4.8 million in accrued discretionary incentive compensation, $2.3 million in wages and benefits and $6.4 million in various other SG&A expenses. The increase in SG&A expenses was offset by a $3.1 million expense incurred in the third quarter of 2021 for compensation resulting from the retirement of our former chief financial officer in recognition of service.

SG&A expenses were $182.3 million and $155.0 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $27.3 million, or 18%, including increases of $16.3 million in accrued discretionary incentive compensation, $7.8 million in wages and benefits, $1.9 million in advertising and marketing expenses, $1.7 million in bank fees and $9.3 million in various other SG&A expenses. The increase in SG&A expenses was offset by a $3.1 million expense incurred in the third quarter of 2021 for compensation resulting from the retirement of our former chief financial officer in recognition of service and a $6.6 million expense incurred in the second quarter of 2021 for compensation and benefits resulting from the passing of our general counsel. The $6.6 million expense relates to contractual commitments including the acceleration of grants previously awarded as well as a discretionary award in recognition of service.

Operating Expenses

Operating expenses were $119.5 million and $92.1 million for the three months ended September 30, 2022 and 2021, respectively, an increase of $27.4 million, or 30%, including an increase of $25.1 million associated with our GDSO operations, including the Recent Acquisitions, in part due to increased credit card fees related to the increases in volume and price, higher salary expense and higher rent expense due in part to greater activity at our stores, an increase in our environmental reserve and an increase in maintenance and repair expenses. Operating expenses associated with our terminal operations increased $2.3 million, in part due to increased maintenance and repair expenses.

Operating expenses were $327.3 million and $260.8 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $66.5 million, or 25%, including an increase of $65.1 million associated with our GDSO operations, including the Recent Acquisitions, in part due to increased credit card fees related to the increases in volume and price, higher salary expense and higher rent expense due in part to greater activity at our stores, an increase in our environmental reserve and an increase in maintenance and repair expenses. Operating expenses associated with our terminal operations increased $1.4 million.

Amortization Expense

Amortization expense related to intangible assets was $2.1 million and $2.7 million for the three months ended September 30, 2022 and 2021, respectively, and $6.7 million and $8.1 million for the nine months ended September 30, 2022 and 2021, respectively.

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Net (Loss) Gain on Sale and Disposition of Assets

Net gain on sale and disposition of assets was $81.5 million for the nine months ended September 30, 2022, primarily related to the sale of the Revere Terminal (see Note 11 of Notes to Consolidated Financial Statements for more information) and to a gain of $4.9 million, primarily due to the sale of GDSO sites. The respective net (loss) gain on sale and disposition of assets for the three months ended September 30, 2022 and for each of the three and nine months ended September 30, 2021 was immaterial.

Interest Expense

Interest expense was $19.0 million and $19.7 million for the three months ended September 30, 2022 and 2021, respectively, a decrease of $0.7 million, or 3%.

Interest expense was $61.5 million and $60.3 million for the nine months ended September 30, 2022 and 2021, respectively, an increase of $1.2 million, or 2%.

Income Tax Expense

Income tax expense was $10.8 million and $0.4 million for the three months ended September 30, 2022 and 2021, respectively, and $14.9 million and $0.8 million for the nine months ended September 30, 2022 and 2021, respectively. The respective income tax expense reflects the income tax expense from the operating results of GMG, which is a taxable entity for federal and state income tax purposes.

Liquidity and Capital Resources

Liquidity

Our primary liquidity needs are to fund our working capital requirements, capital expenditures and distributions and to service our indebtedness. Our primary sources of liquidity are cash generated from operations, amounts available under our working capital revolving credit facility and equity and debt offerings. Please read “—Credit Agreement” for more information on our working capital revolving credit facility.

Working capital was $175.9 million and $225.5 million at September 30, 2022 and December 31, 2021, respectively, a decrease of $49.6 million. Changes in current assets and current liabilities decreasing our working capital primarily include an increase of $196.2 million in accounts payable primarily due to higher prices and a decrease of $81.8 million in inventories due to market structure. The decrease in working capital was offset by a decrease of $204.7 million in the current portion of our working capital revolving credit facility and an increase of $18.9 million in accounts receivable also primarily due to higher prices.

Cash Distributions

Common Units

During 2022, 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, 2022	$	20.9 million	Fourth quarter 2021
May 13, 2022	$	21.3 million	First quarter 2022
August 12, 2022	$	21.8 million	Second quarter 2022

In addition, on October 25, 2022, the board of directors of our general partner declared a quarterly cash distribution of $0.6250 per unit ($2.50 per unit on an annualized basis) on all of our outstanding common units for the

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period from July 1, 2022 through September 30, 2022 to our common unitholders of record as of the close of business on November 8, 2022. We expect to pay the total cash distribution of approximately $22.7 million on November 14, 2022.

Preferred Units

During 2022, we paid the following cash distributions to holders of the Series A Preferred Units and the Series B Preferred Units:


	Series A		Series B
	Preferred Units		Preferred Units		Distribution Paid for the
Cash Distribution Payment Date	Total Paid		Total Paid		Quarterly Period Covering
February 15, 2022	$	1.7 million	$	1.8 million	November 15, 2021 - February 14, 2022
May 16, 2022	$	1.7 million	$	1.8 million	February 15, 2022 - May 14, 2022
August 15, 2022	$	1.7 million	$	1.8 million	May 15, 2022 - August 14, 2022

In addition, on October 17, 2022, the board of directors of our general partner declared a quarterly cash distribution of $0.609375 per unit ($2.4375 per unit on an annualized basis) on the Series A Preferred Units for the period from August 15, 2022 through November 14, 2022 to our Series A preferred unitholders of record as of the opening of business on November 1, 2022. We expect to pay the total cash distribution of approximately $1.7 million on November 15, 2022.

The board of directors of our general partner also declared a quarterly cash distribution of $0.59375 per unit ($2.375 per unit on an annualized basis) on the Series B Preferred Units for the period from August 15, 2022 through November 14, 2022 to our Series B preferred unitholders of record as of the opening of business on November 1, 2022. We expect to pay the total cash distribution of approximately $1.8 million on November 15, 2022.

Contractual Obligations

We have contractual obligations that are required to be settled in cash. The amounts of our contractual obligations at September 30, 2022 were as follows (in thousands):


	Payments Due by Period
	Remainder of
Contractual Obligations	2022		Beyond 2022		Total
Credit facility obligations (1)	$	776	$	102,738	$	103,514
Senior notes obligations (2)		—		1,046,408		1,046,408
Operating lease obligations (3)		18,743		320,669		339,412
Other long-term liabilities (4)		6,559		66,470		73,029
Financing obligations (5)		3,858		113,449		117,307
Total	$	29,936	$	1,649,734	$	1,679,670

(1)

Includes principal and interest on our working capital revolving credit facility and our revolving credit facility at September 30, 2022 and assumes a ratable payment through the expiration date. Our credit agreement has a contractual maturity of May 6, 2024 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)	Includes principal and interest on our senior notes. No principal payments are required prior to maturity. See Note 8 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information on our senior notes.

(3)	Includes operating lease obligations related to leases for office space and computer equipment, land, gasoline stations, railcars and barges.

(4)	Includes amounts related to our brand fee agreement and amounts related to our pipeline connection agreement, access right agreements and our pension and deferred compensation obligations.

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(5)

Includes lease rental payments in connection with (i) the acquisition of Capitol Petroleum Group (“Capitol”) related to properties previously sold by Capitol within two sale-leaseback transactions; and (ii) the sale of real property assets 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 8 of Notes to Consolidated Financial Statement in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

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 $27.8 million and $28.1 million in maintenance capital expenditures for the nine months ended September 30, 2022 and 2021, respectively, which are included in capital expenditures in the accompanying consolidated statements of cash flows, of which approximately $25.0 million and $25.9 million for the nine months ended September 30, 2022 and 2021, 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 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 $204.5 million and $37.4 million in expansion capital expenditures, including acquired property and equipment, for the nine months ended September 30, 2022 and 2021, respectively, primarily related to investments in our gasoline station business.

For the nine months ended September 30, 2022, the $204.5 million in expansion capital expenditures includes approximately $166.5 million in property and equipment associated with the acquisitions of Tidewater, Miller Oil and Consumers Petroleum (see Note 2 of Notes to Consolidated Financial Statements), and $38.0 million in expansion capital expenditures, primarily related to investments in our gasoline stations.

We currently expect maintenance capital expenditures of approximately $45.0 million to $55.0 million and expansion capital expenditures, excluding acquisitions, of approximately $50.0 million to $60.0 million in 2022, 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 COVID-19 and unanticipated events or opportunities requiring additional maintenance or investments.

We believe that we will have sufficient cash flow from operations, borrowing capacity under our credit agreement and the ability to issue additional equity and/or debt securities to meet our financial commitments, debt service obligations, contingencies and anticipated capital expenditures. However, we are subject to business and operational risks, including uncertainties related to the extent and duration of COVID-19 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.

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Cash Flow

The following table summarizes cash flow activity (in thousands):


	Nine Months Ended
	September 30,
	2022		2021
Net cash provided by operating activities	$	576,906	$	99,057
Net cash used in investing activities	$	(194,702)	$	(81,477)
Net cash used in financing activities	$	(377,567)	$	(11,929)

Operating Activities

Cash flow from operating activities generally reflects our net income, balance sheet changes arising from inventory purchasing patterns, the timing of collections on our accounts receivable, the seasonality of parts of our businesses, fluctuations in product prices, working capital requirements and general market conditions.

Net cash provided by operating activities was $576.9 million and $99.1 million for the nine months ended September 30, 2022 and 2021, respectively, for a period-over-period increase in cash flow from operating activities of $477.8 million. The period-over-period change primarily reflects a net gain on the sale and disposition of assets of $81.5 million, primarily related to the sale of the Revere Terminal (see Note 11 of Notes to Consolidated Financial Statements).

Except for net income, the primary drivers of the changes in operating activities include the following (in thousands):


	Nine Months Ended
	September 30,
	2022		2021
Increase in accounts receivable	$	(18,584)	$	(133,591)
Decrease (increase) in inventories	$	87,356	$	(27,726)
Increase in accounts payable	$	196,168	$	107,076

For the nine months ended September 30, 2022, the increases in accounts receivable and accounts payable are in part due to the increase in prices. The decrease in inventories is primarily due to carrying lower levels of inventories during the period, offset by the increase in prices.

For the nine months ended September 30, 2021, the increases in accounts receivable, inventories and accounts payable are largely due to the increase in prices.

Investing Activities

Net cash used in investing activities was $194.7 million for the nine months ended September 30, 2022 and included $255.2 million in acquisitions ($154.7 million for Consumers Petroleum, $60.1 million for Miller Oil and $40.4 million for Tidewater), $38.0 million in expansion capital expenditures and $27.8 million in maintenance capital expenditures. Net cash used in investing activities was offset by $126.3 million in proceeds from the sale of property and equipment, primarily related to the sale of the Revere Terminal.

Net cash used in investing activities was $81.4 million for the nine months ended September 30, 2021 and included $37.4 million in expansion capital expenditures, $28.1 million in maintenance capital expenditures, $18.0 million in acquisitions, primarily related to company-operated gasoline stations and convenience stores, and $1.7 million in seller note issuances which represent notes we received from buyers in connection with the sale of certain of our gasoline stations. Net cash used in investing activities was offset by $3.8 million in proceeds from the sale of property and equipment.

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Please read “—Capital Expenditures” for a discussion of our capital expenditures for the nine months ended September 30, 2022 and 2021.

Financing Activities

Net cash used in financing activities was $377.6 million for the nine months ended September 30, 2022 and included $354.7 million in net payments on our working capital revolving credit facility, $74.3 million in cash distributions to our limited partners (preferred and common unitholders) and our general partner, $2.6 million in the repurchase of common units pursuant to our repurchase program for future satisfaction of our LTIP obligations and $1.6 million in LTIP units withheld for tax obligations related to awards that vested in 2022. Net cash used in financing activities was offset by $55.6 million in net borrowings from our revolving credit facility, primarily to fund our acquisitions.

Net cash used in financing activities was $11.9 million for the nine months ended September 30, 2021 and included $78.6 million in net payments on our revolving credit facility, $68.0 million in cash distributions to our limited partners (preferred and common unitholders) and our general partner, $3.8 million in the repurchase of common units pursuant to our repurchase program for future satisfaction of our LTIP obligations and $2.2 million in LTIP units withheld for tax obligations related to awards that vested in 2021, offset by $72.2 million in net proceeds from the issuance of the Series B Preferred Units and $68.5 million in net borrowing from our working capital revolving credit facility due primarily to the increase in prices. The proceeds from the issuance of the Series B units were used to pay down the revolving credit facility.

See Note 7 of Notes to Consolidated Financial Statements for supplemental cash flow information related to our working capital revolving credit facility and revolving credit facility.

Credit Agreement

Certain subsidiaries of ours, as borrowers, and we and certain of our subsidiaries, as guarantors, have a $1.55 billion senior secured credit facility. The credit agreement expires on May 6, 2024.

On March 9, 2022, we and certain of our subsidiaries entered into a sixth amendment to the credit agreement which, among other things, amended certain terms and provisions of the credit agreement to provide for $200.0 million of working capital interim commitments which increased the total aggregate commitment from $1.35 billion to $1.55 billion. On March 30, 2022, we and certain of our subsidiaries entered into a seventh amendment to the credit agreement which, among other things, (i) increased the working capital revolving credit facility by $200.0 million and simultaneously reduced the working capital interim commitments to $0; (ii) refreshed the accordion feature under the credit agreement to permit us to request increases of up to $300.0 million in the total credit facility; and (iii) replaced the Cost of Funds (as defined in the credit agreement) pricing option with a Daily SOFR pricing option. All other material terms of the credit agreement remain substantially the same as disclosed in Note 8 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

We repay amounts outstanding and reborrow funds based on our working capital requirements and, therefore, classify as a current liability the portion of the working capital revolving credit facility we expect to pay down during the course of the year. The long-term portion of the working capital revolving credit facility is the amount we expect to be outstanding during the entire year.

There are two facilities under the credit agreement:

●

a working capital revolving credit facility to be used for working capital purposes and letters of credit in the principal amount equal to the lesser of our borrowing base and $1.1 billion; and

●

a $450.0 million revolving credit facility to be used for general corporate purposes.

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In addition, the credit agreement has an accordion feature whereby we may request on the same terms and conditions then applicable to the credit agreement, provided no Event of Default (as defined in the credit agreement) then exists, an increase to the working capital revolving credit facility, the revolving credit facility, or both, by up to another $300.0 million, in the aggregate, for a total credit facility of up to $1.85 billion. Any such request for an increase must be in a minimum amount of $25.0 million. We cannot provide assurance, however, that our lending group will agree to fund any request by us for additional amounts in excess of the total available commitments of $1.55 billion.

In addition, the credit agreement includes a swing line pursuant to which Bank of America, N.A., as the swing line lender, may make swing line loans in U.S. dollars in an aggregate amount equal to the lesser of (a) $75.0 million and (b) the Aggregate WC Commitments (as defined in the credit agreement). Swing line loans will bear interest at the Base Rate (as defined in the credit agreement). The swing line is a sub-portion of the working capital revolving credit facility and is not an addition to the total available commitments of $1.55 billion.

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.

Borrowings under the working capital revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 2.00% to 2.50%, or (2) the base rate plus 1.00% to 1.50%, each depending on the Utilization Amount (as defined in the credit agreement). Borrowings under the revolving credit facility bear interest at (1) the Daily or Term SOFR plus a 0.10% SOFR adjustment plus 1.75% to 2.75%, or (2) the base rate plus 0.75% to 1.75%, each depending on the Combined Total Leverage Ratio (as defined in the credit agreement).

The average interest rates for the credit agreement were 4.1% and 2.3% for the three months ended September 30, 2022 and 2021, respectively, and 3.1% and 2.5% for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, we had $0 borrowings outstanding on the working capital revolving credit facility and $99.0 million outstanding on the revolving credit facility. In addition, we had outstanding letters of credit of $205.2 million. Subject to borrowing base limitations, the total remaining availability for borrowings and letters of credit was $1.25 billion and $795.9 million at September 30, 2022 and December 31, 2021, 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 September 30, 2022.

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, 2021 for additional information on the credit agreement.

Senior Notes

We had 7.00% senior notes due 2027 and 6.875% senior notes due 2029 outstanding at September 30, 2022 and December 31, 2021. 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, 2021 for additional information on these senior notes.

Financing Obligations

We had financing obligations outstanding at September 30, 2022 and December 31, 2021 associated with historical sale-leaseback transactions that did not meet the criteria for sale accounting. Please read Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for additional information.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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, 2021. There have been no material changes in our policies that had a significant impact on our financial condition and results of operations for the periods covered in this report.

During the three and nine months ended September 30, 2022, there has been no material change to our critical accounting estimates discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021, with the addition of the following:

Business Combinations

Under the purchase method of accounting, we recognize tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values. We record any excess of the purchase price over the fair value of the net tangible and intangible assets acquired as goodwill. The accounting for business combinations requires us to make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing purchased dealer supply contracts include, in part, the expected use 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. If the subsequent actual results and updated projections of the underlying business activity change compared with the assumptions and projections used to develop these values, we could experience impairment charges. In addition, we have estimated the economic lives of certain acquired assets and these lives are used to calculate depreciation and amortization expense. If our estimates of the economic lives change, depreciation or amortization expenses could be accelerated or slowed.

Recent Accounting Pronouncements

A description and related impact expected from the adoption of certain new accounting pronouncements is provided in Note 17 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, 2022, we had total borrowings outstanding under our credit agreement of $99.0 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

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of operations, of approximately $1.0 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.

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 and forward fixed price commitments. Any hedge 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.

At September 30, 2022, 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%
	2022		Price Increase		Price Decrease
Exchange traded derivative contracts	$	52,729	$	(21,144)	$	21,144
Forward derivative contracts		(2,667)		(6,786)		6,786
Total	$	50,062	$	(27,930)	$	27,930

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, 2022. 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

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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 $28.6 million at September 30, 2022.

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-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, 2022.

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, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.Legal Proceedings

The information required by this item is included in Note 16 of Notes to Consolidated Financial Statements and is incorporated herein by reference.

Item 1A.Risk Factors

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition or future results.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6.Exhibits

(a)

Exhibits


2.1**	—	Purchase and Sale Agreement, dated as of December 9, 2020, by and between Consumers Petroleum of Connecticut, Incorporated, Putling Greens I, LLC, Wheels of CT, Inc., CPCI, LLC and Wiehl Estate, LLC, as collective Seller, and Global Partners LP, as Buyer (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on January 31, 2022).

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	—	Fifth Amended and Restated Agreement of Limited Partnership of Global Partners LP dated as of March 24, 2021 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on March 24, 2021).

4.1	—	Indenture, dated as of 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).

4.2	—	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	—	First Supplemental Indenture, dated as of October 28, 2020, among the Issuers, the Guarantors and Regions Bank, as trustee (incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-4 filed on December 16, 2020).

4.4	—	First Supplemental Indenture, dated as of October 28, 2020, among the Issuers, the Guarantors and Regions Bank, as successor to Deutsche Bank Trust Company Americas, as trustee (incorporated herein by reference to Exhibit 4.5 to the Registration Statement on Form S-4 filed on December 16, 2020).

10.1*	—	Form of Phantom Unit Award Agreement for Independent Directors under Global Partners LP Long-Term Incentive Plan.

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

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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 (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.DEF*	—	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	—	Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	—	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	—	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

* Filed herewith.

** Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Partnership undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the U.S. Securities and Exchange Commission.

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

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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
	By:	Global GP LLC,
		its general partner


Dated: November 4, 2022		By:	/s/ Eric Slifka
			Eric Slifka
			President and Chief Executive Officer
			(Principal Executive Officer)


Dated: November 4, 2022		By:	/s/ Gregory B. Hanson
			Gregory B. Hanson
			Chief Financial Officer
			(Principal Financial Officer)