**UNITED STATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

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**FORM 10-Q**

 

**(Mark One)**

 
| **ý** | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                                                                                  | ** ** |
|------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** ** | ** ** | ** **                                                                                                                                                                                                    | ** ** |
| ** ** | ** ** | **For the quarterly period  ended March 31, 2006**                                                                                                                                                            | ** ** |
| ** ** | ** ** | ** **                                                                                                                                                                                                    | ** ** |
| ** ** | ** ** | **OR**                                                                                                                                                                                                        | ** ** |
| ** ** | ** ** | ** **                                                                                                                                                                                                    | ** ** |
| **o**      | ** ** | **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 9161800 South StreetWaltham, Massachusetts 02454-9161**(Address of principal executive offices,including zip code)

 

**(781) 894-8800**(Registrant’s telephonenumber, including area code)

 

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

 

Indicate by check mark whether the registrant is an accelerated filer(as defined in Rule 12b-2 of the Exchange Act).  Yes oNo ý

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer (as defined in Rule 12b-2 of the Exchange Act.(Check one):

 

Large accelerated filer         o            Acceleratedfiler   o            Non-acceleratedfiler           ý

 

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).   Yes oNo ý

 

The issuer had 5,642,424 common units and 5,642,424 subordinated unitsoutstanding as of May 8, 2006.

 

 

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**TABLE OF CONTENTS**

 
| **PART I.      FINANCIAL  INFORMATION**                                                                 |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|
| ** **                                                                                                                            |   |
| **Item 1.     Financial  Statements**                                                                        |   |
| ** **                                                                                                                            |   |
| Consolidated  Balance Sheets as of March 31, 2006 and December 31, 2005                                                               |   |
|                                                                                                                                  |   |
| Consolidated/Combined  Statements of Income for the three months ended March 31, 2006 and 2005                                        |   |
|                                                                                                                                  |   |
| Consolidated/Combined  Statements of Cash Flows for the three months ended March 31, 2006 and 2005                                    |   |
|                                                                                                                                  |   |
| Consolidated  Statements of Partners’ Equity for the three months ended March 31, 2006                                           |   |
|                                                                                                                                  |   |
| Notes  to Financial Statements                                                                                                        |   |
|                                                                                                                                  |   |
| **Item  2.     Management’s Discussion and Analysis of  Financial Condition and Results of Operations** |   |
| ** **                                                                                                                            |   |
| **Item 3.     Quantitative and  Qualitative Disclosures about Market Risk**                                  |   |
| ** **                                                                                                                            |   |
| **Item 4.     Controls and  Procedures**                                                                     |   |
| ** **                                                                                                                            |   |
| **PART  II.     OTHER INFORMATION**                                                                          |   |
| ** **                                                                                                                            |   |
| **Item  1.     Legal Proceedings**                                                                           |   |
| ** **                                                                                                                            |   |
| **Item 1A.  Risk Factors**                                                                                                  |   |
| ** **                                                                                                                            |   |
| **Item 6.     Exhibits**                                                                                     |   |
| ** **                                                                                                                            |   |
| **SIGNATURES**                                                                                                                        |   |
| ** **                                                                                                                            |   |
| **INDEX  TO EXHIBITS**                                                                                                                |   |

 

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**Item 1.****    Financial Statements**

 

**GLOBALPARTNERS LP**

**CONSOLIDATEDBALANCE SHEETS**

**(In thousands, except unit data)**

**(Unaudited)**

** **

 
| ** **                                                                                                                 | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|------------------------|------------|
| **Assets**                                                                                                                 |       |                |       |                   |       |
| Current assets:                                                                                                            |       |                |       |                   |       |
| Cash and cash equivalents                                                                                                  |       | $                   | 823        |                   | $          | 1,769 |   |
| Accounts receivable, net                                                                                                   |       | 180,426             |       | 237,861                |       |
| Accounts receivable – affiliates                                                                                      |       | 2,180               |       | 2,005                  |       |
| Inventories                                                                                                                |       | 150,553             |       | 260,714                |       |
| Brokerage margin deposits                                                                                                  |       | 4,769               |       | 9,210                  |       |
| Prepaid expenses and other current assets                                                                                  |       | 6,501               |       | 7,781                  |       |
| Total current assets                                                                                                       |       | 345,252             |       | 519,340                |       |
|                                                                                                                       |       |                |       |                   |       |
| Property and equipment, net                                                                                                |       | 22,233              |       | 21,975                 |       |
| Intangible assets, net                                                                                                     |       | 10,197              |       | 10,603                 |       |
| Other assets                                                                                                               |       | 2,673               |       | 2,838                  |       |
|                                                                                                                       |       |                |       |                   |       |
| Total assets                                                                                                               |       | $                   | 380,355    |                   | $          | 554,756 |   |
|                                                                                                                       |       |                |       |                   |       |
| **Liabilities  and partners’ equity**                                                                                 |       |                |       |                   |       |
| Current liabilities:                                                                                                       |       |                |       |                   |       |
| Accounts payable                                                                                                           |       | $                   | 130,976    |                   | $          | 259,463 |   |
| Notes payable, other – current portion                                                                                |       | 297                 |       | 297                    |       |
| Income taxes payable                                                                                                       |       | 679                 |       | 1,200                  |       |
| Accrued expenses and other current  liabilities                                                                            |       | 23,346              |       | 28,615                 |       |
| Obligations on forward fixed price  contracts and other derivatives                                                        |       | 5,253               |       | 1,038                  |       |
| Total current liabilities                                                                                                  |       | 160,551             |       | 290,613                |       |
|                                                                                                                       |       |                |       |                   |       |
| Long-term  liabilities:                                                                                                    |       |                |       |                   |       |
| Revolving line of credit                                                                                                   |       | 129,700             |       | 181,600                |       |
| Notes payable, other – less current portion                                                                           |       | 1,486               |       | 1,559                  |       |
| Other long-term liabilities                                                                                                |       | 4,355               |       | 4,676                  |       |
| Total  long-term liabilities                                                                                               |       | 135,541             |       | 187,835                |       |
|                                                                                                                       |       |                |       |                   |       |
| Partners’ equity                                                                                                      |       |                |       |                   |       |
| Common unitholders (5,642,424 units issued  and outstanding at  March 31, 2006 and December 31, 2005)                      |       | 101,410             |       | 97,512                 |       |
| Subordinated unitholders (5,642,424 units  issued and outstanding at  March 31, 2006 and December 31, 2005)                |       | (16,474             | )          | (20,372                | )          |
| General partner interest (2% interest with  230,303 equivalent units  outstanding at March 31, 2006 and December 31, 2005) |       | (673                | )          | (832                   | )          |
| Total partners’ equity                                                                                                |       | 84,263              |       | 76,308                 |       |
|                                                                                                                       |       |                |       |                   |       |
| Total liabilities and partners’ equity                                                                                |       | $                   | 380,355    |                   | $          | 554,756 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

1

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**GLOBAL PARTNERS LP**

**CONSOLIDATED/COMBINED STATEMENTS OF INCOME**

**(In thousands, except per unit data)**

**(Unaudited)**

 
| ** **                                                                    | ** ** | **Successor**                                    | ** ** | **Predecessor** | ** ** |
|-------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|-----------------|------------|
| ** **                                                                    | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                                                    | ** ** | **2006**                                         | ** ** | **2005**        | ** ** |
| ** **                                                                    | ** ** | **Consolidated**                                 | ** ** | **Combined**    | ** ** |
|                                                                          |       |                                             |       |            |       |
| Sales                                                                         |       | $                                                | 1,351,023  |            | $          | 1,152,079 |   |
| Cost of sales                                                                 |       | 1,318,806                                        |       | 1,123,691       |       |
| Gross profit                                                                  |       | 32,217                                           |       | 28,388          |       |
|                                                                          |       |                                             |       |            |       |
| Selling, general and administrative  expenses                                 |       | 10,572                                           |       | 9,590           |       |
| Operating expenses                                                            |       | 5,551                                            |       | 5,066           |       |
| Amortization expenses                                                         |       | 406                                              |       | 406             |       |
| Operating income                                                              |       | 15,688                                           |       | 13,326          |       |
|                                                                          |       |                                             |       |            |       |
| Interest expense                                                              |       | 2,320                                            |       | 2,026           |       |
|                                                                          |       |                                             |       |            |       |
| Income before income tax  expense                                             |       | 13,368                                           |       | 11,300          |       |
|                                                                          |       |                                             |       |            |       |
| Income tax expense                                                            |       | 680                                              |       | —          |       |
|                                                                          |       |                                             |       |            |       |
| Net income                                                                    |       | 12,688                                           |       | $               | 11,300     |   |
|                                                                          |       |                                             |       |            |       |
| Less:                                                                         |       |                                             |       |            |       |
| General partner’s interest in net income                                 |       | 254                                              |       |            |       |
| Limited partners’ interest in net income                                 |       | $                                                | 12,434     |            |       |   |
|                                                                          |       |                                             |       |            |       |
| Net income per limited partner unit, basic  and diluted(1)                    |       | $                                                | 0.85       |            |       |   |
|                                                                          |       |                                             |       |            |       |
| Weighted average limited partners’ units  outstanding, basic and diluted |       | 11,285                                           |       |            |       |

 

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(1)           See Note 3 for net income per limitedpartner unit calculation.

 

The accompanying notes are an integral part of these financialstatements.

 

2

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**GLOBAL PARTNERS LP**

**CONSOLIDATED/COMBINED STATEMENTS OF CASHFLOWS**

**(In thousands)**

**(Unaudited)**

 
| ** **                                                                         | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                                                                         | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                                                         | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                                                                         | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
| **Operating  activities**                                                          |       |                              |       |            |       |
| Net income                                                                         |       | $                                 | 12,688     |            | $          | 11,300 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |       |                              |       |            |       |
| Depreciation and amortization                                                      |       | 966                               |       | 958             |       |
| Amortization of deferred financing fees                                            |       | 106                               |       | 163             |       |
| Changes in operating assets and  liabilities, net of acquisition:                  |       |                              |       |            |       |
| Accounts receivable                                                                |       | 57,435                            |       | (14,039         | )          |
| Accounts receivable – affiliate                                               |       | (175                              | )          | 414             |       |
| Inventories                                                                        |       | 110,161                           |       | 31,144          |       |
| Loss on sale of property and equipment                                             |       | 11                                |       | 2               |       |
| Prepaid expenses, all other current assets  and other assets                       |       | 5,780                             |       | 3,219           |       |
| Accounts payable                                                                   |       | (129,008                          | )          | (6,253          | )          |
| Accrued expenses and all other current  liabilities                                |       | (1,375                            | )          | 14,464          |       |
| Other long-term liabilities                                                        |       | —                            |       | (597            | )          |
| Net cash provided by operating activities                                          |       | 56,589                            |       | 40,775          |       |
| ** **                                                                         |       |                              |       |            |       |
| **Investing activities**                                                           |       |                              |       |            |       |
| Proceeds from sale of property and equipment                                       |       | 19                                |       | 5               |       |
| Purchases of property and equipment                                                |       | (848                              | )          | (165            | )          |
| Net cash used in investing activities                                              |       | (829                              | )          | (160            | )          |
| ** **                                                                         |       |                              |       |            |       |
| **Financing activities**                                                           |       |                              |       |            |       |
| Payments on revolving line of credit, net                                          |       | (51,900                           | )          | (41,900         | )          |
| Payments on note payable, other                                                    |       | (73                               | )          | (68             | )          |
| Distributions to partners                                                          |       | (4,733                            | )          | —          |       |
| Net cash used in financing activities                                              |       | (56,706                           | )          | (41,968         | )          |
|                                                                               |       |                              |       |            |       |
| Decrease in cash and cash equivalents                                              |       | (946                              | )          | (1,353          | )          |
| Cash and cash equivalents at beginning of period                                   |       | 1,769                             |       | 3,306           |       |
| Cash and cash equivalents at end of period                                         |       | $                                 | 823        |            | $          | 1,953 |   |
| ** **                                                                         |       |                              |       |            |       |
| **Supplemental information**                                                       |       |                              |       |            |       |
| Cash paid during the period for interest                                           |       | $                                 | 2,332      |            | $          | 2,050 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

3

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** **

**GLOBAL PARTNERS LP**

**CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY**

**(In thousands)**

**(Unaudited)**

 
| ** **                   | ** ** | **Common  Unitholders** | ** ** | **Subordinated  Unitholders** | ** ** | **General  Partner  Interest** | ** ** | **Total  Partners’  Equity** | ** ** |
|------------------------------|------------|-------------------------|------------|-------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
|                         |       |                    |       |                          |       |                           |       |                              |       |
| Balance at December 31, 2005 |       | $                       | 97,512     |                          | $          | (20,372                        | )          | $                                 | (832       | ) | $ | 76,308 |   |
|                         |       |                    |       |                          |       |                           |       |                              |       |
| Distribution to partners     |       | (2,319                  | )          | (2,319                        | )          | (95                            | )          | (4,733                            | )          |
|                         |       |                    |       |                          |       |                           |       |                              |       |
| Net income                   |       | 6,217                   |       | 6,217                         |       | 254                            |       | 12,688                            |       |
|                         |       |                    |       |                          |       |                           |       |                              |       |
| Balance at March 31, 2006    |       | $                       | 101,410    |                          | $          | (16,474                        | )          | $                                 | (673       | ) | $ | 84,263 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

4

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**GLOBAL PARTNERS LP**

**NOTES TO FINANCIAL STATEMENTS**

**(Unaudited)**

 

**Note 1.****       Organizationand Basis of Presentation**

 

***Organization***

 

Global Partners LP (the “Partnership”) is a publicly held masterlimited partnership that engages in the wholesale and commercial distributionof refined petroleum products, natural gas and ancillary services to companiesdomestically and, on a limited basis, internationally.  The Partnership commenced operations onOctober 4, 2005 upon the completion of its initial public offering of commonunits (the “IPO”).  (See thePartnership’s Annual Report on Form 10-K for the year ended December 31, 2005for more information regarding the IPO.)

 

The Partnership has four operating subsidiaries:  Global Companies LLC, its subsidiary, GlenHes Corp., Global Montello Group Corp. and Chelsea Sandwich LLC (the fouroperating subsidiaries, collectively, the “Companies”).  The Companies are wholly owned by GlobalOperating LLC, a wholly owned subsidiary of the Partnership.

 

The Partnership’s 2% general partner interest is held by Global GP LLC(the “General Partner”).  The GeneralPartner, which is owned by affiliates of the Slifka family, manages thePartnership’s operations and activities and employs its officers and substantiallyall of its personnel.  Affiliates of theGeneral Partner, including its directors and executive officers, own 87,724common units and 5,642,424 subordinated units, representing a combined 49.8%limited partner interest.

 

References to “Global Partners LP” or “the Partnership” or “the GeneralPartner” as it relates to the combined financial statements and theseaccompanying notes with respect to the three months ended March 31, 2005 referto the business of Global Companies LLC and its affiliates, Glen Hes Corp.,Global Montello Group LLC and Chelsea Sandwich LLC (collectively, the“Predecessor”).

 

Immediately after becoming a master limited partnership, thePartnership converted Global Montello Group LLC (the predecessor to GlobalMontello Group Corp.) into a taxable corporation.  References to “the Companies” in thePartnership’s combined financial statements and these accompanying notesinclude Global Montello Group LLC with respect to the three months ended March31, 2005 and Global Montello Group Corp. with respect to the three months endedMarch 31, 2006.

 

**Basis ofPresentation**

 

***Interim Financial Statements***

 

**The accompanying consolidated financialstatements as of March 31, 2006 and December 31, 2005 and for the three monthsended March 31, 2006 reflect the accounts of the Partnership.  The accompanying combined financialstatements for the three months ended March 31, 2005 reflect the accounts of thePredecessor.  All intercompany balancesand transactions have been eliminated.**

 

The accompanying unaudited consolidated/combinedfinancial statements have been prepared in accordance with accountingprinciples generally accepted in the United States (“GAAP”) and reflect alladjustments (consisting only of normal recurring adjustments) which are, in theopinion of management, necessary for a fair presentation of the financialcondition and operating results for the interim periods.  The interim financial information, which hasbeen prepared pursuant to the rules and regulation of the Securities andExchange Commission (“SEC”), should be read in conjunction with theconsolidated/combined financial statements for the year ended December 31, 2005and notes thereto contained in the Partnership’s Annual Report on Form10-K.  The results of operations for thethree months ended March 31, 2006 are not necessarily indicative of the resultsof operations that will be realized for the entire year ending December 31,2006.  

 

5

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The balance sheet at December 31, 2005 has beenderived from the audited financial statements and footnotes thereto included inthe Partnership’s Annual Report on Form 10-K for the year ended December 31,2005.

 

As demand for some of the Partnership’s refinedpetroleum products, especially home heating oil and residual oil for spaceheating purposes, is generally greater during the winter months, sales areexpected be higher during the first and fourth quarters of the calendar yearwhich may result in significant fluctuations in the Partnership’s quarterlyoperating results.

 

**Note 2.**       Reclassification

 

Certain prior year amounts in theconsolidated/combined financial statements and accompanying notes have beenreclassified to conform to the current year presentation.

 

**Note 3.**       NetIncome Per Limited Partner Unit

** **

The computation of net income per limited partner unit is based on theweighted average number of common and subordinated units outstanding during theyear.  Basic and diluted net income perlimited partner unit are determined by dividing net income after deducting theamount allocated to the general partner interest (including its incentivedistribution in excess of its 2% interest) by the weighted average number ofoutstanding limited partner units during the period in accordance with EmergingIssues Task Force (“EITF”) 03-06, “Participating Securities and the Two-ClassMethod under FASB Statement No. 128’’ (“EITF 03-06”).  EITF 03-06 addresses the computation ofearnings per share (in the Partnership’s case, net income per limited partner unit)by an entity that has issued securities other than common stock thatcontractually entitle the holder to participate in dividends and earnings ofthe entity when, and if, it declares dividends on its common stock (in thePartnership’s case, distributions on its units).  Essentially, EITF 03-06 provides that in anyaccounting period where the Partnership’s aggregate net income exceeds itsaggregate distribution for such period, the Partnership is required to present netincome per limited partner unit as if all of the earnings for the periods were distributed,regardless of whether those earnings would actually be distributed during aparticular period from an economic or practical perspective.  EITF 03-06 does not impact the Partnership’soverall net income or other financial results; however, for periods in whichthe Partnership’s aggregate net income exceeds its aggregate distributions forsuch period, it will have the impact of reducing the earnings per limitedpartner unit.  This result occurs as alarger portion of the Partnership’s aggregate earnings is allocated to theincentive distribution rights held by the General Partner, as if distributed,even though the Partnership makes cash distributions on the basis of cashavailable for distributions, not earnings, in any given accounting period.  In accounting periods where aggregate netincome does not exceed aggregate distributions for such period, EITF 03-06 doesnot have any impact on the Partnership’s net income per limited partner unitcalculation.

 

The following sets forth the net income allocation using this methodfor the three months ended March 31, 2006 (in thousands, except per unit data):

 
| ** **                                                 | ** ** | ** ** | ** ** | **Per Limited  Partner Unit** | ** ** |
|------------------------------------------------------------|------------|------------|------------|-----------------------------------------|------------|
| ** **                                                 | ** ** | ** ** | ** ** | ** **                              | ** ** |
| Net income                                                 |       | $          | 12,688     |                                    |       |   |
| Less:                                                      |       |       |       |                                    |       |
| General partner’s incentive distribution  paid        |       | —     |       |                                    |       |
| Subtotal                                                   |       | 12,688     |       |                                    |       |
| General partner 2% ownership                               |       | (254       | )          |                                    |       |
| Net income available to limited partners                   |       | 12,434     |       | $                                       | 1.10       |   |
| Dilutive impact of theoretical distribution  of earnings   |       | (2,872     | )          | (0.25                                   | )          |
| Net income available to limited partners  under EITF 03-06 |       | $          | 9,562      |                                    | $          | 0.85 |   |
|                                                       |       |       |       |                                    |       |
| Weighted average limited partners’ units  outstanding |       | 11,285     |       |                                    |       |

 

6

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The Partnership did not and was not required to declare cashdistributions during the period January 1, 2006 through March 31, 2006 whichwould result in an incentive distribution to the General Partner as indicatedabove.

 

**Note 4.**       Inventories

 

Inventories, which are valued at the lower of cost or market based onthe first-in, first-out method, consisted of the following (in thousands):

 
| ** **                                   | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|----------------------------------------------|------------|---------------------|------------|------------------------|------------|
| ** **                                   | ** ** | ** **          | ** ** | ** **             | ** ** |
| Distillates:  light oil, diesel and kerosene |       | $                   | 95,194     |                   | $          | 195,171 |   |
| Gasoline                                     |       | 19,509              |       | 19,311                 |       |
| Blend stock                                  |       | 10,948              |       | 6,782                  |       |
| Residual oil                                 |       | 24,902              |       | 39,450                 |       |
| Total                                        |       | $                   | 150,553    |                   | $          | 260,714 |   |

 

The decrease of $110.2 million was primarily due to lowerdistillates inventory on hand as the Partnership approached the end of itsheating season.

 

The Partnership hedges substantially all of its inventory purchasesthrough futures, options and swap agreements.  In addition to its own inventory, the Partnership has exchangeagreements with unrelated third-party suppliers, whereby it may draw inventoryfrom these other suppliers.  Positiveexchange balances are accounted for as accounts receivable.  Negative exchange balances are accounted foras accounts payable.  Exchangetransactions are valued using current quoted market prices.  The impact of exchange agreements was notmaterial to the Partnership’s financial statements at March 31, 2006 andDecember 31, 2005.

 

**Note 5.**       DerivativeFinancial Instruments

 

The Partnership recognizes all changes in the fairvalue of derivatives currently in earnings. The fair value of derivatives is determined through the use ofindependent markets and is based upon the prevailing market prices of suchinstruments at the date of valuation. The Partnership enters into futures contracts for the receipt ordelivery of refined petroleum products in future periods.  The contracts are entered into in the normalcourse of business to reduce risk of loss of inventory on hand, which couldresult through fluctuations in market prices. Changes in the fair value of these contracts as well as the offsettinggain or loss on the hedged inventory item are recognized currently in earningsas either an increase or decrease in cost of sales.  Ineffectiveness related to these hedgingactivities was immaterial at March 31, 2006. 

 

The Partnership also uses futures contracts and swapsto hedge exposure under forward purchase and sale commitments.  These agreements are intended to hedge thecost component of virtually all of the Partnership’s forward commitments.  Changes in the fair value of these contractsare recognized currently in earnings as an increase or decrease in cost ofsales.

 

The Partnership also markets and sells naturalgas.  The Partnership conducts businessby entering into forward purchase commitments for natural gas only when itsimultaneously enters into arrangements for the sale of product for physicaldelivery to third-party users.  Throughthese transactions, which establish an immediate margin, the Partnership seeksto maintain a position that is substantially balanced between firm forwardpurchase and sales commitments.  Naturalgas is generally purchased and sold at fixed prices and quantities.  Current price quotes from actively tradedmarkets are used in all cases to determine the contracts’ fair value.  Changes in the fair value of these contractsare recognized currently in earnings as an increase or decrease in cost of sales.

 

7

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The composition and (obligations on) fair value of derivativeinstruments consisted of the following (in thousands):

 
| ** **                    | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|-------------------------------|------------|---------------------|------------|------------------------|------------|
|                          |       |                |       |                   |       |
| Forward contracts             |       | $                   | (2,641     | )                      | $          | 4,587 |   |
| Swaps, options and other, net |       | (2,612              | )          | (5,625                 | )          |
|                          |       | $                   | (5,253     | )                      | $          | (1,038 | ) |

 

The Partnership formally documents all relationships between hedginginstruments and hedged items, after its risk management objectives and strategyfor undertaking the hedge are determined. The Partnership calculates hedge effectiveness on a quarterly basis.  This process includes specific identificationof the hedging instrument and the hedged transaction, the nature of the riskbeing hedged and how the hedging instrument’s effectiveness will beassessed.  Both at the inception of thehedge and on an ongoing basis, the Partnership assesses whether the derivativesthat are used in hedging transactions are highly effective in offsetting changesin fair value of hedged items.  Thederivative instruments that qualify for hedge accounting are fair value hedges.

 

The Partnership has a daily margin requirement with its broker, basedon the prior day’s market results on open futures contracts.  The required brokerage margin balance was$4.8 million and $9.2 million at March 31, 2006 and December 31, 2005,respectively.

 

The Partnership is exposed to credit loss in the event ofnonperformance by counterparties of forward contracts, options and swapagreements, but the Partnership has no current reason to expect any materialnonperformance by any of these counterparties. Futures contracts, the primary derivative instrument utilized by thePartnership, are traded on regulated exchanges, greatly reducing potentialcredit risks.  Exposure on swap andcertain option agreements is limited to the amount of the recorded fair valueas of the balance sheet dates.  ThePartnership utilizes primarily one broker for all derivative transactions andthe right of offset exists.  Accordingly,the fair value of all derivative instruments is displayed on a net basis on thebalance sheets.

 

**Note 6.**       Debt

 

In connection with the closing of its IPO, the Partnership entered intoa four-year senior secured credit agreement (the “Credit Agreement”) in anaggregate principal amount of up to $400.0 million.  In November 2005, the Credit Agreement wasamended to increase total available commitments from $400.0 million to $500.0million.  The working capital revolvingcredit facility was increased by $100.0 million, comprising a $50.0 millionincrease in the permanent working capital revolving credit facility commitmentand a new seasonal overline facility of $50.0 million (which is available eachyear only during the period between September 1st and June 30th).

 

8

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The credit facilities are available to fund working capital, makeacquisitions and provide payment for general partnership purposes.  There are three facilities under the CreditAgreement:

 

•     aworking capital revolving credit facility to be used for working capitalpurposes and letters of credit in the principal amount equal to the lesser ofour borrowing base and $450.0 million, of which two $50.0 million seasonaloverline facilities are available each year only during the period betweenSeptember 1st and June 30th; 

 

•     a$35.0 million acquisition facility to be used for funding acquisitions similarto our business line that have a purchase price of $25.0 million or less or$35.0 million or less in the aggregate in any 12-month period; and

 

•     a$15.0 million revolving credit facility to be used for general purposes,including payment of distributions to our unitholders.

 

Borrowings under the Partnership’s working capital revolving credit,acquisition credit and revolving credit facilities currently bear interest atthe Partnership’s option at (1) the Eurodollar rate, plus 1%, 13/4%or 11/2%, respectively, (2) thecost of funds rate, plus 1%, 13/4% or 11/2%, respectively, or (3) the bank’s base rate, at thePartnership’s option.  The Partnership incurs aletter of credit fee of 1% per annum for each letter of credit issued.  In addition, the Partnership incurs acommitment fee on the unused portion of the three facilities under the CreditAgreement (including the unused portion of either of the seasonal overlinefacilities exercised by the Partnership) at a rate of 25 basis points perannum, a facility fee of 10 basis points per annum on any unexercised seasonaloverline facility during the period between September 1st and June 30th and a seasonal overline fee of $30,000 eachtime the Partnership elects to exercise either of the seasonal overlinefacilities.

 

The Credit Agreement will mature in October2009.  Accordingly, theCredit Agreement has been classified as long term in the accompanying balancesheets.  At March 31, 2006, availabilityunder the Credit Agreement was reduced by the outstanding balance under theworking capital revolving credit facility of approximately $129.7 million andby letters of credit totaling approximately $55.0 million.  The total remaining availability forborrowings and letters of credit at March 31, 2006 was approximately $315.3million.  The average interest rate forthe period from January 1, 2006 through March 31, 2006 was 5.5%.

 

The Credit Agreement is secured by substantially all of the assets ofthe Partnership and each of the Companies and is guaranteed by the GeneralPartner.  The Credit Agreement imposescertain requirements including, for example, a prohibition against distributionsif any potential default or event of default as defined in the CreditAgreement, as amended, would occur, and limitations on the Partnership’sability to grant liens, make certain loans or investments, incur additionalindebtedness or guarantee other indebtedness, make any material change to thenature of the Partnership’s business or undergo a fundamental change, make anymaterial dispositions, acquire another company, enter into a merger,consolidation, sale leaseback transaction or purchase of assets, or makecapital expenditures in excess of specified levels.  The Credit Agreement also imposes covenantsthat require the Partnership to maintain certain minimum working capitalamounts, a minimum EBITDA ratio, a minimum interest coverage ratio and amaximum leverage ratio.  The Partnershipwas in compliance with these covenants at March 31, 2006.

 

The Credit Agreement limits distributions by the Partnership to itsunitholders to the amount of the Partnership’s available cash and permitsborrowings to fund such distributions only under the revolving creditfacility.  The revolving credit facilityis subject to an annual “clean-down” period, requiring the Partnership toreduce the amount outstanding under the revolving credit facility to $0 for 30consecutive calendar days in each calendar year.

 

9

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**Note 7.**       EmployeeBenefit Plans with Related Party

 

The Partnership’s net periodic benefit cost for itsdefined benefit pension plan consisted of the following components (inthousands):

 

| ** **                     | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|--------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                     | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                     | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                     | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
|                           |       |                              |       |            |       |
| Service cost                   |       | $                                 | 191        |            | $          | 170 |   |
| Interest cost                  |       | 150                               |       | 131             |       |
| Expected return on plan assets |       | (145                              | )          | (135            | )          |
| Net periodic benefit cost      |       | $                                 | 196        |            | $          | 166 |   |
|                                |            |                                   |            |                 |            |  |  |  |  |

 

**Note 8.**       RelatedParty Transactions

 

In connection with the Partnership’s IPO, the Partnership entered intoa Second Amended and Restated Terminal Storage Rental and Throughput Agreementwhich, among other things, extended the term of the then current non-cancelableterminal facility agreement with Global Petroleum Corp. (“GPC”) throughDecember 2013.  The agreement isaccounted for as an operating lease.  Theexpense under this agreement (or the applicable predecessor agreement with GPC,as the case may be) was $2.0 million and $1.9 million for the three monthsended March 31, 2006 and 2005, respectively. 

 

GPC provides certain terminal operating management services to thePartnership and uses certain administrative, accounting and informationprocessing services of the Partnership. The expense from these services was approximately $17,000 for each ofthe periods ended March 31, 2006 and 2005. These affiliate charges have been recorded in selling, general andadministrative expenses in the accompanying statements of income.  In connection with the IPO, the Partnershipentered into an Amended and Restated Services Agreement with GPC which, amongother things, extended the term of the agreement through December 31, 2007.

 

The Partnership also provides certain administrative, accounting andinformation processing services, and the use of certain facilities, to AllianceEnergy Corp. (“Alliance”), an affiliate of the Partnership that is 90% owned bymembers of the Slifka family.  The incomefrom these services was approximately $80,000 for each of the periods ended March31, 2006 and 2005.  These fees have beenrecorded as an offset to selling, general and administrative expenses in thestatements of income.  In connection withthe IPO, the Partnership entered into an Amended and Restated ServicesAgreement with Alliance which, among other things, extended the term of theagreement through December 31, 2007.

 

The Partnership sells refined petroleum products to Alliance at arm’slength and at prevailing market prices at the time of delivery.  Sales to Alliance were $5.0 million and $3.8million for the three months ended March 31, 2006 and 2005, respectively.

 

The table below presents receivables incurred in connection with theAmended and Restated Services Agreement (or the applicable predecessoragreement, as the case may be) between Alliance and the Partnership, andreceivables (payable) incurred in connection with other transactions withaffiliates (in thousands):

 
| ** **                     | ** ** | **March 31,  2006** | ** ** | **December 31,  2005** | ** ** |
|--------------------------------|------------|---------------------|------------|------------------------|------------|
| ** **                     | ** ** | ** **          | ** ** | ** **             | ** ** |
| Receivables from Alliance      |       | $                   | 2,207      |                   | $          | 1,748 |   |
| (Payable) receivables from GPC |       | (36                 | )          | 56                     |       |
| Receivables from Global GP LLC |       |                | 39         |                   |       | 202 |   |

 

10

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Effective October 4, 2005, the General Partner employs substantiallyall of the Partnership’s employees and charges the Partnership for theirservices.  The amount charged for thethree months ended March 31, 2006 was approximately $9.0 million includingpayroll taxes.  The Partnership alsoreimburses the General Partner for its contributions under the GeneralPartner’s 401(k) Savings and Profit Sharing Plan and the General Partner’sPension Plan.

 

**Note 9.**       CashDistributions

 

The Partnership intends to consider regular cash distributions tounitholders on a quarterly basis, although there is no assurance as to thefuture cash distributions since they are dependent upon future earnings, cashflows, capital requirements, financial condition and other factors.  The Credit Agreement prohibits the Partnerhipfrom making cash distributions if any potential default or event of default, asdefined in the Credit Agreement, occurs or would result from the cashdistribution.

 

Within 45 days after the end of each quarter, the Partnership willdistribute all of its available cash (as defined in its partnership agreement)to unitholders of record on the applicable record date.  The amount of available cash is all cash onhand at the end of the quarter; plus all cash on hand on the date ofdetermination of available cash for the quarter resulting from working capitalborrowings made after the end of the quarter; less the amount of cash reservesestablished by the General Partner to provide for the proper conduct of thePartnership’s business, to comply with applicable law, any of the Partnership’sdebt instruments, or other agreements or to provide funds for distributions tounitholders and to the General Partner for any one or more of the next fourquarters.  Working capital borrowings aregenerally borrowings that are made under the Credit Agreement and in all casesare used solely for working capital purposes or to pay distributions topartners.

 

The Partnership will make distributions of available cash fromoperating surplus for any quarter during any subordination period as defined inthe partnership agreement in the following manner: firstly, 98% to the commonunitholders, pro rata, and 2% to the General Partner, until the Partnershipdistributes for each outstanding common unit an amount equal to the minimumquarterly distribution for that quarter; secondly, 98% to the commonunitholders, pro rata, and 2% to the General Partner, until the Partnershipdistributes for each outstanding common unit an amount equal to any arrearagesin payment of the minimum quarterly distribution on the common units for anyprior quarters during the subordination period; thirdly, 98% to thesubordinated unitholders, pro rata, and 2% to the General Partner, until thePartnership distributes for each subordinated unit an amount equal to the minimumquarterly distribution for that quarter; and thereafter, cash in excess of theminimum quarterly distributions is distributed to the unitholders and theGeneral Partner based on the percentages as provided in the partnershipagreement.

 

On January 24, 2006, the board of directors of the General Partnerdeclared a distribution on all common, subordinated, and general partner unitsfor the fourth quarter of 2005, and increased the amount of said distributionby 3% over the minimum quarterly distribution, from $0.4125 per unit to $0.425per unit.  On February 14, 2006, thefourth quarter 2005 distribution was paid on a pro rata basis to cover theperiod from the closing of the Partnership’s IPO on October 4, 2005 throughDecember 31, 2005.  The aggregate amountof the distribution was approximately $4.7 million.

 

On April 24, 2006, the Partnership’s board ofdirectorsdeclared a quarterly cash distribution of $0.425 per unit for the period fromJanuary 1, 2006 through March 31, 2006 ($1.70 per unit on an annualizedbasis).  On May 15, 2006, the Partnershipwill pay a cash distribution to its common and subordinated unitholders ofrecord as of the close of business on May 4, 2006.

 

11

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**Note 10.**     SegmentReporting

 

The Partnership is a wholesale and commercial distributor ofdistillates, gasoline, residual oil and bunker fuel whose business is organizedwithin two operating segments (Wholesale and Commercial), based on the way thechief operating decision maker (CEO) manages the business and on the similarityof customers and expected long-term financial performance of each segment.  The accounting policies of the segments arethe same as those described in Note 2, Summary of Significant AccountingPolicies, in the Partnership’s Annual Report on Form 10-K for the fiscal yearended December 31, 2005.

 

In the Wholesale segment, the Partnership sells home heating oil,diesel, kerosene, unbranded gasoline and residual oil to wholesalers, retailersand commercial customers.  Generally,customers use their own vehicles or contract carriers to take delivery of theproduct at bulk terminals and inland storage facilities that the Partnershipowns or controls or with which it has throughput arrangements.

 

The Commercial segment includes (i) sales of home heating oil, diesel,kerosene, unbranded gasoline and residual oil to customers in the public sectorthrough competitive bidding and to large commercial and industrial customers,(ii) custom blended residual oil and distillates delivered by bunker barges orfrom a terminal dock and (iii) customers including federal and state agencies,municipalities, large industrial companies, many autonomous authorities such astransportation authorities and water resource authorities, colleges anduniversities and a limited group of small utilities.  Unlike the Wholesale segment, in theCommercial segment, the Partnership generally arranges the delivery of theproduct to the customer’s designated location, typically hiring third-partycommon carriers to deliver the product.

 

The Partnership evaluates segment performance based on net productmargins before allocations of corporate and indirect operating costs,depreciation, amortization (including non-cash charges) and interest.  Based on the way the CEO manages thebusiness, it is not reasonably possible for the Partnership to allocate thecomponents of operating costs and expenses between the reportablesegments.  Additionally, due to thecommingled nature and uses of the Partnership’s assets, it is not reasonablypossible for the Partnership to allocate assets between the two segments.  There were no intersegment sales for theperiods presented below. 

 

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

 

| ** **                                 | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|--------------------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                 | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                                 | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
| **Wholesale Segment:**                     |       |                              |       |            |       |   |   |
| Sales                                      |       | $                                 | 1,196,979  |            | $          | 1,027,162 |   |
| Net product margin*                        |       |                              |       |            |       |   |   |
| Distillates                                |       | $                                 | 19,597     |            | $          | 14,805 |   |
| Gasoline                                   |       |                              | 3,236      |            |       | 2,605 |   |
| Residual oil                               |       |                              | 4,654      |            |       | 6,583 |   |
| Total                                      |       | $                                 | 27,487     |            | $          | 23,993 |   |
| **Commercial Segment:**                    |       |                              |       |            |       |   |   |
| Sales                                      |       | $                                 | 154,044    |            | $          | 124,917 |   |
| Net product margin*                        |       | $                                 | 5,136      |            | $          | 4,801 |   |
| **Combined sales and net product margin:** |       |                              |       |            |       |   |   |
| Sales                                      |       | $                                 | 1,351,023  |            | $          | 1,152,079 |   |
| Net product margin*                        |       | $                                 | 32,623     |            | $          | 28,794 |   |
| Depreciation allocated to cost of sales    |       |                              | 406        |            |       | 406 |   |
| **Combined gross profit**                  |       | $                                 | 32,217     |            | $          | 28,388 |   |
|                                            |            |                                   |            |                 |            |  |  |  |  |

 

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*       Net product margin is a supplementalnon-GAAP financial measure used by management and external users of thePartnership’s financial statements to assess product costs associated with thePartnership’s business.  The table abovereconciles net product margin on a combined basis to gross profit, a directlycomparable GAAP measure.

 

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

 

| ** **                                                              | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|-------------------------------------------------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                                                              | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                                              | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                                                              | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
|                                                                    |       |                              |       |            |       |   |   |
| **Combined  gross profit**                                              |       | $                                 | 32,217     |            | $          | 28,388 |   |
| **Operating costs and expenses not allocated  to reportable segments:** |       |                              |       |            |       |   |   |
| Selling, general and administrative  expenses                           |       |                              | 10,572     |            |       | 9,590 |   |
| Operating expenses                                                      |       |                              | 5,551      |            |       | 5,066 |   |
| Amortization expenses                                                   |       |                              | 406        |            |       | 406 |   |
| Operating income                                                        |       |                              | 15,688     |            |       | 13,326 |   |
| Interest expense                                                        |       |                              | 2,320      |            |       | 2,026 |   |
| Income tax expense                                                      |       |                              | 680        |            |       | — |   |
| **Net  income**                                                         |       | $                                 | 12,688     |            | $          | 11,300 |   |

 

There were no foreign sales for the quarters ended March 31, 2006 and 2005.  The Partnership has no foreign assets.

 

**Note 11.**     RecentlyIssued Accounting Standards

 

*SFAS No. 123 (revised) “Share-Based Payment”*

 

In December 2004, the Financial Accounting Standards Board issued Statementof Financial Accounting Standards No. 123 (revised), “Share-Based Payment”(“SFAS 123 (revised)”).  This revisionprescribes the accounting for a wide range of equity-based compensationarrangements, including share options, restricted share plans, performance-basedawards, share appreciation rights and employee share purchase plans, andgenerally requires the fair value of equity-based awards to be expensed on theincome statement.  SFAS 123 (revised)allows for either modified prospective recognition of compensation expense ormodified retrospective recognition.  ThePartnership adopted SFAS 123 (revised) on January 1, 2006, and the adoption ofthis standard did not have a material effect on its financial condition,results of operations or cash flows as there currently are no awardsoutstanding.

 

*EITF Issue No. 04-13 “Accounting forPurchases and Sales of Inventory with the Same Counterparty”*

 

In September 2005, the EITF issued Issue No. 04-13, “Accounting forPurchases and Sales of Inventory with the Same Counterparty” (“EITF 04-13”).  The EITF concluded that inventory purchasesand sales transactions with the same counterparty should be combined foraccounting purposes if entered into in contemplation of each other.  The EITF provided indicators to be consideredfor purposes of determining whether such transactions are entered into incontemplation of each other.  Guidancewas also provided on the circumstances under which nonmonetary exchanges ofinventory within the same line of business should be recognized at fairvalue.  EITF 04-13 is effective inreporting periods beginning after March 13, 2006.  The Partnership believes the adoption of EITF04-13 will not have a material impact to its financial condition, results ofoperations or cash flows as the Partnership already records exchange transactionson a combined basis.  

 

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**Note 12.**     SubsequentEvent

 

As previously announced, on May 8, 2006, the Partnership completed itsacquisition of a refined petroleum products terminal in Bridgeport, Connecticutfrom Connecticut Petroleum Wholesalers and one of its affiliates.  The terminal has storage capacity forapproximately 109,000 barrels of refined products, including #2 fuel oil andlow sulfur diesel, and additional products.

 

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**Item 2.****        Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

The following discussion and analysis of financial condition andresults of operations of Global Partners LP should be read in conjunction withthe historical consolidated financial statements of Global Partners LP and thenotes thereto included elsewhere in this quarterly report on Form 10-Q.

 

**Forward-LookingStatements**

** **

This quarterly report on Form 10-Q contains certain forward-lookingstatements within the meaning of the federal securities laws.  These forward-looking statements areidentified as any statements that do not relate strictly to historical orcurrent facts and can generally be identified by the use offorward-looking terminology including “may,” “believe,” “expect,” “anticipate,”“estimate,” “continue” or other similar words. Such statements may discuss future expectations for or containprojections of results ofoperations, financial condition or our ability to make distributions tounitholders or state other forward-looking information.  Forward-looking statements are not guaranteesof performance.  Although webelieve these forward-looking statements are based on reasonable assumptions,statements made regarding future results are subject to a number ofassumptions, uncertainties and risks, many of which are beyond our control,which may cause future results to be materially different from the resultsstated or implied in this document. These risks and uncertainties include, among other things:

 

•     Wemay not have sufficient cash from operations to enable us to pay the minimumquarterly distribution following establishment of cash reserves and payment offees and expenses, including payments to our general partner.

•     Warmerweather conditions could adversely affect our results of operations and cashavailable for distribution to our unitholders.

•     Ourrisk management policies cannot eliminate all commodity risk.  In addition, any non-compliance with our riskmanagement policies could result in significant financial losses.

•     Weare exposed to trade credit risk in the ordinary course of our businessactivities.

•     Dueto our lack of asset and geographic diversification, adverse developments inthe terminals that we use or in our operating areas could reduce our ability tomake distributions to our unitholders.

•     Weare exposed to performance risk in our supply chain.

•     Ourgeneral partner and its affiliates have conflicts of interest and limitedfiduciary duties, which may permit them to favor their own interests to thedetriment of unitholders.

•     Unitholdershave limited voting rights and are not entitled to elect our general partner orits directors or initially to remove our general partner without its consent,which could lower the trading price of our common units.

•     Unitholdersmay be required to pay taxes on their share of our income even if they do notreceive any cash distributions from us.

Additional information about risks and uncertainties that could causeactual results to differ materially from forward-looking statements iscontained in Part II, Item 1A, “Risk Factors.”

 

All forward-looking statements included in this Form 10-Q and allsubsequent written or oral forward-looking statements attributable to us or personsacting on our behalf are expressly qualified in their entirety by thesecautionary statements.  Theforward-looking statements speak only as of the date made, other than asrequired by law, and we undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise.

 

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**Overview**

 

***General***

*** ***

Weown, control or have access to one of the largest terminal networks of refinedpetroleum products in New England.  Weare one of the largest wholesale distributors of distillates (such as homeheating oil, diesel and kerosene), gasoline, and residual oil and bunker fuelto wholesalers, retailers and commercial customers in New England.  We are also one of the largest wholesalemarketers of home heating oil in New England.

 

Wepurchase our refined petroleum products primarily from domestic and foreignrefiners, traders and producers and sell these products in two segments,Wholesale and Commercial.  Like mostindependent marketers of refined petroleum products, we base our pricing onspot physical prices and routinely use the New York Mercantile Exchange****(“NYMEX”)or derivatives to hedge our commodity risk inherent in buying and sellingenergy commodities.  Through the use ofregulated exchanges or derivatives, we maintain a position that issubstantially balanced between purchased volumes and sales volumes or futuredelivery obligations.  We earn a marginby selling the product for physical delivery to third parties.

 

OnOctober 4, 2005, we closed our initial public offering of 5,635,000 commonunits (including 735,000 common units issued pursuant to the underwriters’exercise of their over-allotment option) representing a 48.9% limited partnerinterest in us.  In connection with theclosing of this offering, (1) Global Companies LLC distributed $45.3 million incash to those affiliates of the Slifka family holding 100% of the ownershipinterests in Global Companies LLC and (2) Global Petroleum Corp., Montello OilCorporation, Larea Holdings, LLC, Larea Holdings II, LLC, Chelsea TerminalLimited Partnership and Sandwich Terminal, L.L.C. contributed all of theirownership interests in Global Companies LLC and its affiliates, Glen Hes Corp.,Global Montello Group LLC and Chelsea Sandwich LLC, to us.

 

Proceeds from the sale of common units in the initial public offeringwere used in part to repay $45.3 million of borrowings under our then-existingrevolving credit facility and $51.0 million of outstanding indebtedness under aterm loan of Global Petroleum Corp. and certain other Slifka family entitiesguaranteed by affiliates of Global Petroleum Corp., including Global CompaniesLLC and its Affiliates.

 

***Productsand Operational Structure***

*** ***

Ourproducts include distillates, gasoline and residual oil and bunker fuel.  The distillates we sell are used primarilyfor space heating of residential and commercial buildings and as fuel fortrucks and off-road construction equipment. We sell unbranded gasoline, diesel and heating oil under agreements withmajor suppliers of refined petroleum products. We sell residual oil to major housing units, such as public housingauthorities, colleges and hospitals and large industrial facilities that useprocessed steam in their manufacturing processes.  We sell bunker fuel, which we can customblend, to cruise ships, bulk carriers and fishing fleets.

 

Ourbusiness is divided into two segments:

 

•     *Wholesale.*  This segment includes sales of distillates,unbranded gasoline and residual oil to home heating oil retailers, retailgasoline station operators and wholesale distributors.

 

•     *Commercial.*  This segment includes sales and deliveries ofdistillates, unbranded gasoline, residual oil and small amounts of natural gasto customers in the public sector and to large commercial and industrialcustomers, either through a competitive bidding process or through contracts ofvarious terms.  This segment alsopurchases, custom blends, sells and delivers bunker fuel and diesel to cruiseships, bulk carriers and fishing fleets delivered by bunker barges.

 

Ourbusiness activities are substantially comprised of purchasing, terminalling,storing and selling refined petroleum products. We believe that the combination of our terminalling and storageactivities, together with our marketing activities, provides a balance that hasa stabilizing effect on our results of operations and cash flow.  In a contango market (when product prices forfuture deliveries are higher than for current deliveries), we may use ourstorage capacity to improve our margins by storing products we have purchasedat lower prices in the current month for delivery to customers at higher pricesin future months.  In a backwardatedmarket (when product prices for future deliveries are lower than for currentdeliveries) because of our high turnover of inventory, we are able to minimizeour inventories and commodity risk while attempting to maintain or increase netproduct margins.

 

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***Outlook***

*** ***

Thissection identifies certain risks and certain economic or industry-wide factorsthat may affect our financial performance and results of operations in thefuture, both in the short-term and in the long-term.  Our primary short-term concerns anduncertainties are as follows:

 

•     *As a public company, we will incur significantlegal, accounting and other expenses that we did not incur as a privatecompany.*  Webecame a public company on September 28, 2005. Prior to that, we had no history operating as a public company.  In addition, the Sarbanes-Oxley Act of 2002,as well as new rules subsequently implemented by the Securities and ExchangeCommission and the New York Stock Exchange, has required changes in corporategovernance practices of public companies. We also expect these new rules and regulations to make it more difficultand more expensive for our general partner to obtain director and officerliability insurance, and we may have to reduce policy limits and coverage orincur substantially higher costs to obtain the same or similar coverage as wehave obtained historically.  We arecurrently evaluating and monitoring developments with respect to these newrules, and we cannot predict or estimate the amount of additional costs we mayincur or the timing of such costs.

 

•     *We commit substantial resources to pursuingacquisitions, though there is no certainty that we will successfully completeany acquisitions or receive the economic results we anticipate from completedacquisitions.* Consistent with our business strategy, we are continuously engaged indiscussions with potential sellers of terminalling, storage and/or marketing assetsand related businesses.  In an effort toprudently and economically leverage our asset base, knowledge base and skillsets, management has also expanded its efforts to pursue businesses that areclosely related to or significantly intertwined with our existing lines ofbusiness.  Growth in our cash flow perunit may depend on our ability to make accretive acquisitions.  We may be unable to make such accretiveacquisitions for a number of reasons, including, but not limited to, thefollowing:  (1) we are unable to identifyattractive acquisition candidates or negotiate acceptable purchase contractswith them; (2) we are unable to raise financing for such acquisitions oneconomically acceptable terms; or (3) we are outbid by competitors.  In addition, we may consummate acquisitions,which at the time of consummation we believe will be accretive, but whichultimately may not be accretive.  If anyof these events were to occur, our future growth would be limited.  We can give no assurance that our current orfuture acquisition efforts will be successful or that any such acquisition willbe completed on terms that are favorable to us. Our results of operations and financial condition, as well as those ofour competitors, will depend in part upon certain economic or industry-widefactors, including the following:

 

•     *Warmer weather conditions could adverselyaffect our results of operations and financial condition. *Because we supplydistributors whose customers depend on home heating oil and residual oil for spaceheating purposes during the winter, weather conditions have a significantimpact on the demand for both home heating oil and residual oil.  As a result, warmer-than-normal temperaturesduring the first and fourth calendar quarters in one or more regions in whichwe operate can decrease the total volume we sell and the gross profit realizedon those sales and, consequently, could adversely affect our results ofoperations.

 

•     *Our financial results are seasonal andgenerally better in the first and fourth quarters of the calendar year. *Demand for someof our refined petroleum products, specifically home heating oil and residualoil for space heating purposes, is generally higher during November throughMarch than during April through October. We obtain a significant portion of our sales during these wintermonths.  Therefore, our results ofoperations for the first and fourth calendar quarters are generally better thanfor the second and third quarters.  Withlower cash flow during the second and third calendar quarters, we may berequired to borrow money in order to pay the minimum quarterly distribution toour unitholders.

 

•     *Energy efficiency, new technology andalternative fuels, natural gas in particular, could reduce demand for ourproducts.*  Increasedconservation and technological advances have adversely affected the demand forhome heating oil and residual oil. Consumption of residual oil has steadily declined over the last threedecades.  We could face additionalcompetition from alternative energy sources as a result of futuregovernment-mandated controls or regulation further promoting the use of cleanerfuels.  Due in part to support forconversion to natural gas on environmental grounds, some industrial residualoil users have switched to natural gas. Those end users who are dual-fuel users have the ability to switchbetween residual oil and natural gas. During a period of increasing residual oil prices relative to the pricesof natural gas, dual-fuel customers may switch to natural gas, or over thelong-term, may convert to natural gas. Such switching or conversion could have an adverse effect on our resultsof operations and financial condition.

 

17

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•     *New, stricter environmental laws and regulationscould significantly increase our costs, which could adversely affect ourresults of operations and financial condition.*  Our operations are subject to federal, stateand local laws and regulations regulating product quality specifications andother environmental matters.  The trendin environmental regulation is towards more restrictions and limitations onactivities that may affect the environment. Our business may be adversely affected by increased costs andliabilities resulting from such stricter laws and regulations.  We try to anticipate future regulatoryrequirements that might be imposed and to plan accordingly to remain incompliance with changing environmental laws and regulations and to minimize thecosts of such compliance.  However, therecan be no assurances as to the timing and type of such changes in existing lawsor the promulgation of new laws or the amount of any required expendituresassociated therewith.

 

•     *Consolidation of the New England supplynetwork.*  In recent years, majorterminals have been acquired and their former owners have reduced or eliminatedoperations in the wholesale market.  Thelargest terminals, which form the core of the region’s supply network, arestill operating but are owned by fewer companies.

 

**Results of Operations**

** **

***EvaluatingOur Results of Operations***

*** ***

Our management uses avariety of financial and operational measurements to analyze ourperformance.  Thesemeasurements include: (1) net product margin, (2) gross profit, (3) selling,general and administrative expenses (“SG&A”), (4) operating expenses, (5)heating degree days, (6) adjusted net income per diluted limited partner unit,(7) earnings before interest, taxes, depreciation and amortization (“EBITDA”)and (8) distributable cash flow. 

 

*Net Product Margin*

* *

Weview net product margin as an important performance measure of the coreprofitability of our operations.  Wereview net product margin monthly for consistency and trend analysis.  We define net product margin as our salesminus product costs.  Sales include salesof distillates, unbranded gasoline, residual oil and bunker fuel and naturalgas.  Product costs include the cost ofacquiring the refined petroleum products that we sell and all associated costsincluding shipping and handling costs to bring such products to the point ofsale.

 

*GrossProfit*

 

Wedefine gross profit as our sales minus product costs and terminal depreciationexpense allocated to cost of sales. Sales include sales of distillates, unbranded gasoline, residual oil andbunker fuel and natural gas.  Productcosts include the cost of acquiring the refined petroleum products that we selland all associated costs to bring such products to the point of sale.

 

*Selling, Generaland Administrative Expenses*

* *

OurSG&A expenses include marketing costs, corporate overhead, employeesalaries and benefits, pension and 401(k) plan expenses, discretionary bonuses,non-interest financing costs, professional fees and information technologyexpenses.  Employee-related expensesincluding employee salaries, discretionary bonuses and related payroll taxes,and benefits, pension and 401(k) plan expenses are paid by our general partnerwhich, in turn, is reimbursed for these expenses by us.  We will incur additional expenses related tobeing a public company, most of which will be the result of increasedaccounting and legal expenses.

 

*Operating Expenses*

* *

Operatingexpenses are costs associated with the operation of the terminals used in ourbusiness.  Lease payments and storageexpenses, maintenance and repair, utilities, taxes, labor and labor-relatedexpenses comprise the most significant portion of our operating expenses.  These expenses remain relatively stableindependent of the volumes through our system but fluctuate slightly dependingon the activities performed during a specific period.

 

18

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*Degree Day*

* *

A“degree day” is an industry measurement of temperature designed to evaluateenergy demand and consumption.  Degreedays are based on how far the average temperature departs from a human comfortlevel of 65°F.  Each degree oftemperature above 65°F is counted as one cooling degree day, and each degree oftemperature below 65°F is counted as one heating degree day.  Degree days are accumulated each day over thecourse 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 thanusual.  Degree days are officiallyobserved by the National Weather Service and officially archived by theNational Climatic Data Center.  Forpurposes of evaluating our results of operations, we use the normal heatingdegree day amount as reported by the National Weather Service at its LoganInternational Airport station in Boston, Massachusetts.

 

*Adjusted Net Income Per Diluted Limited Partner Unit*

 

Netincome per diluted limited partner unit as dictated by EITF 03-06 istheoretical and pro forma in nature and does not reflect the economicprobabilities of whether earnings for an accounting period would or could bedistributed to unitholders.  Thepartnership agreement does not provide for the quarterly distribution of netincome, rather, it provides for the distribution of available cash, which is acontractually defined term that generally means all cash on hand at the end ofeach quarter after establishment of sufficient cash reserves required tooperate our business in a prudent manner. Accordingly, the distributions we historically paid and will pay infuture periods are not impacted by net income per diluted limited partner unitas dictated by EITF 03-06.  We useadjusted net income per diluted limited partner unit to measure our financialperformance on a per-unit basis. Adjusted net income per diluted limited partner unit is defined as netincome after adding back the theoretical amount allocated to the generalpartner’s interest as provided under EITF 03-06, divided by the weightedaverage number of outstanding diluted limited partner units during the period.  

 

*EBITDA*

* *

EBITDAis used as a supplemental financial measure by management and by external usersof our financial statements, such as investors, commercial banks and researchanalysts, to assess:

* *

•     our compliance with certain financialcovenants included in our debt agreements;

 

•     our financial performance without regardto financing methods, capital structure, income taxes or historical cost basis;

 

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

 

•     our operating performance and return oninvested capital as compared to those of other companies in the wholesalemarketing and distribution of refined petroleum products business, withoutregard to financing methods and capital structure; and

 

•     the viability of acquisitions and capitalexpenditure projects and the overall rates of return of alternative investmentopportunities.

 

EBITDAshould not be considered an alternative to net income, operating income, cashflow from operating activities or any other measure of financial performance orliquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income andoperating income, and these measures may vary among other companies.  Therefore, EBITDA as presented below may notbe comparable to similarly titled measures of other companies.

 

*Distributable CashFlow*

* *

Distributablecash flow also is an important non-GAAP financial measure for our limitedpartners since it serves as an indicator of our success in providing a cash returnon their investment.  Specifically, thisfinancial measure indicates to investors whether or not we are generating cashflows at a level that can sustain or support an increase in our quarterly cashdistribution.  Distributable cash flow isalso a quantitative standard used by the investment community with respect topublicly traded partnerships.  However,distributable cash flow is not a generally accepted

 

19

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accounting principlefinancial measure and should not be considered as an alternative to net income,cash flow from operations, or any other measure of financial performancepresented in accordance with accounting principles generally accepted in theUnited States.  In addition, ourdistributable cash flow may not be comparable to distributable cash flow orsimilarly titled measures of other companies. The generally accepted accounting measure most directly comparable todistributable cash flow is net income.

 

***ThreeMonths Ended March 31, 2006 Compared to Three Months Ended March 31, 2005***

*** ***

***During the first quarter of 2006, we experienced an increase in grossprofits and margins across both our wholesale and commercial segments.  Commodity prices continued to rise during thequarter.  Prices for distillates,gasoline and residual oil increased approximately 12%, 18% and 29%,respectively, for the quarter ended March 31, 2006 compared to the quarterended March 31, 2005.  Temperatures were8.2% lower than normal as measured by aggregate heating degree days. ***

*** ***

Thefollowing table presents our EBITDA and distributable cash flow, our volume,sales, net product margin and gross profit by segment and information onweather conditions (gallons and dollars in thousands, except per unit data):

 

| ** **                                                | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                                                | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                                | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                                                | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
|                                                      |       |                              |       |            |       |
| Adjusted net income per diluted limited partner  unit (1) |       | $                                 | 1.10       |            | $          | — |   |
|                                                      |       |                              |       |            |       |
| EBITDA (2)                                                |       | $                                 | 16,760     |            | $          | 14,447 |   |
|                                                      |       |                              |       |            |       |
| Distributable  cash flow (3)                              |       | $                                 | 12,912     |            | $          | — |   |
|                                                      |       |                              |       |            |       |
| **Wholesale  Segment:**                                   |       |                              |       |            |       |
| Volume (gallons)                                          |       | 688,484                           |       | 752,388         |       |
| Sales                                                     |       | $                                 | 1,196,979  |            | $          | 1,027,162 |   |
| Net product margin (4)                                    |       |                              |       |            |       |
| Distillates                                               |       | 19,597                            |       | 14,805          |       |
| Gasoline                                                  |       | 3,236                             |       | 2,605           |       |
| Residual oil                                              |       | 4,654                             |       | 6,583           |       |
| Total                                                     |       | $                                 | 27,487     |            | $          | 23,993 |   |
| **Commercial  Segment:**                                  |       |                              |       |            |       |   |
| Volume (gallons)                                          |       |                              | 109,479    |            |       | 128,192 |   |
| Sales                                                     |       | $                                 | 154,044    |            | $          | 124,917 |   |
| Net product margin (4)                                    |       |                              | 5,136      |            |       | 4,801 |   |
| **Combined  sales and net product margin:**               |       |                              |       |            |       |   |   |
| Sales                                                     |       | $                                 | 1,351,023  |            | $          | 1,152,079 |   |
| Net product margin (4)                                    |       |                              | 32,623     |            |       | 28,794 |   |
| Depreciation allocated to cost of sales                   |       | 406                               |       | 406             |       |
| **Combined  gross profit**                                |       | $                                 | 32,217     |            | $          | 28,388 |   |
|                                                      |       |                              |       |            |       |   |   |
| **Weather  conditions**                                   |       |                              |       |            |       |   |   |
| Normal heating degree days                                |       |                              | 2,870      |            |       | 2,870 |   |
| Actual heating degree days                                |       |                              | 2,635      |            |       | 3,033 |   |
| Variance from normal heating degree days                  |       |                              | (8.2       | )%              |       | 5.7% |   |
| Variance from prior period actual heating  degree days    |       |                              | (13.1      | )%              |       | (1.6 | )% |
|                                                           |            |                                   |            |                 |            |  |  |  |  |

 

20

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----

(1)    Adjusted net income per diluted limitedpartner unit is a non-GAAP financial measure which is discussed above under“Evaluating Our Operating Results.”  Thetable below presents a reconciliation of adjusted net income per dilutedlimited partner unit to the most directly comparable GAAP financial measure.

 

(2)    EBITDA is a non-GAAP financial measurewhich is discussed above under “Evaluating Our Operating Results.”  The table below presents a reconciliation ofEBITDA to the most directly comparable GAAP financial measures.

 

(3)    Distributable cash flow is a non-GAAPfinancial measure which is discussed above under “Evaluating Our OperatingResults.”  On October 4, 2005, wecompleted our IPO.  Accordingly,distributable cash flow is presented for the period from January 1 throughMarch 31, 2006.  The table below presentsa reconciliation of distributable cash flow to the most directly comparableGAAP financial measure.

 

(4)    Net product margin is a supplementalnon-GAAP financial measure used by management and external users of ourfinancial statements to assess product costs associated with our business.  The table above reconciles net product marginon a combined basis to gross profit, a directly comparable GAAP measure.

 

Thefollowing table presents a reconciliation of adjusted net income per dilutedlimited partner unit to the most directly comparable GAAP financial measure ona historical basis for the three months ended March 31, 2006:

 
| **Reconciliation of adjusted net income per  diluted limited partner unit  to net income per diluted limited partner unit:** |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Net income per diluted limited partner unit  under EITF 03-06                                                                |   | $      | 0.85   |   |
| Dilutive impact of theoretical distribution  of earnings                                                                     |   | 0.25   |   |
| Adjusted net income per diluted limited  partner unit                                                                        |   | $      | 1.10   |   |

 

Thefollowing table presents a reconciliation of EBITDA to the most directlycomparable GAAP financial measures on a historical basis for each of theperiods indicated (in thousands).

 

| ** **                                                             | ** ** | **Successor**                      | ** ** | **Predecessor** | ** ** |
|------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------|------------|
| ** **                                                             | ** ** | **Three  Months Ended  March 31,** | ** ** |
| ** **                                                             | ** ** | **2006**                           | ** ** | **2005**        | ** ** |
| ** **                                                             | ** ** | **Consolidated**                   | ** ** | **Combined**    | ** ** |
| **Reconciliation  of EBITDA to net income:**                           |       |                               |       |            |       |   |   |
| Net income                                                             |       | $                                  | 12,688     |            | $          | 11,300 |   |
| Add:                                                                   |       |                               |       |            |       |   |   |
| Depreciation and amortization                                          |       |                               | 1,072      |            |       | 1,121 |   |
| Interest expense                                                       |       |                               | 2,320      |            |       | 2,026 |   |
| Income tax expense                                                     |       |                               | 680        |            |       | — |   |
| EBITDA                                                                 |       | $                                  | 16,760     |            | $          | 14,447 |   |
|                                                                   |       |                               |       |            |       |   |   |
| **Reconciliation  of EBITDA to cash flows from operating activities:** |       |                               |       |            |       |   |   |
| Cash flow from operating activities                                    |       | $                                  | 56,589     |            | $          | 40,775 |   |
| Decrease in operating assets and  liabilities                          |       |                               | (42,829    | )               |       | (28,354 | ) |
| Interest expense                                                       |       |                               | 2,320      |            |       | 2,026 |   |
| Income tax expense                                                     |       |                               | 680        |            |       | — |   |
| EBITDA                                                                 |       | $                                  | 16,760     |            | $          | 14,447 |   |

 

The following table presents a reconciliation of distributable cashflow to the most directly comparable GAAP financial measures on a historicalbasis, for the three months ended March 31, 2006 (in thousands):

 
| **Reconciliation  of distributable cash flow to net income:** |   |   |   |
|---------------------------------------------------------------|--------|--------|--------|
| Net income                                                    |   | $      | 12,688 |   |
| Depreciation and amortization                                 |   | 1,072  |   |
| Capital expenditures                                          |   | (848   | )      |
| Distributable cash flow                                       |   | $      | 12,912 |   |

 

21

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***Consolidated Results***

* *

Ourtotal sales for the first quarter of 2006 increased $198.9 million, or 17%, to$1,351.0 million as compared to $1,152.1 million for the same period in2005.  The increase was driven by an increase in refined petroleum productprices despite an approximate 83 million gallon, or 9% decrease, to 798 milliongallons in aggregate volume of product sold. The decrease in aggregate volume sold includes an 85 million gallondecrease in distillates and a 12 million gallon decrease in residual oil,offset by a 12 million gallon increase in gasoline.  The number of normal heating degree daysdeclined by 13% to 2,635 days compared to 3,033 days for the quarters endedMarch 31, 2006 and 2005, respectively.  Ourgross profit for the three months ended March 31, 2006 was $32.2million, an increase of $3.8 million, or 13% compared to $28.4 million for thesame period in 2005.  The increase wasprimarily due to higher margins for our products.

*** ***

*Wholesale Segment*

* *

Distillates.  Wholesale distillate sales for the threemonths ended March 31, 2006 was $860.6 million compared to $777.4 million forthe same period in 2005.  The increase of$83.2 million, or 11%, was due to an increasein distillate prices despite a 15% decrease in distillate volume sold.  We attribute the decrease in volume sold tothe expiration of supply contracts in the ordinary course of business and areduction in bulk sales transactions to local competitors.  Our net product margin contribution fromdistillate sales increased by $4.8 million, or 32%, to $19.6 million as aresult of increased blending activities and our ability to pass through tocustomers our increased costs related to sales.

 

Gasoline.  Wholesale gasoline sales for the three monthsended March 31, 2006 was $306.6 million compared to $234.2 million for the sameperiod in 2005.  The increase of $72.4 million, or 31% wasdue to an increase in gasoline pricesand a 7% increase in volume sold. Our net product margin from gasoline sales increased by $0.6 million, or 23%, to $3.2 million.  We attribute this increase in net product margin to an increase in our volume of sales aswell as a focus on sales to higher margin customers and our expanded use of ourbulk storage capacity to store product in a contango market.

 

ResidualOil.  Wholesale residualoil sales for the three months ended March 31, 2006 was $29.8 million comparedto $15.6 million for the same period in 2005. The increase of $14.2 million, or 91%, was the result of an increase in residual oil prices and a 29%increase in residual oil volume sold.  Netproduct margin contribution from residual oil sales decreased $1.9 million, or29%, to $4.7 million, primarily due to a per unit margin reduction.

 

*Commercial Segment*

* *

Inour Commercial segment, residual oil accounted for approximately 84.1% and84.2% of total volume sold for the three months ended March 31, 2006 and 2005,respectively.  Distillates, gasoline andnatural gas accounted for the remainder of the total volume sold.  Commercial residual oil sales for the quarterended March 31, 2006 increased by 15% compared to the same period in 2005 dueto an increase in the price of residual oil despite a 20% decrease in volumesold.  We attribute the decline in volumesold to the closure of plants and/or reductions in production by certaincyclical industry participants in our territory.  This decrease in volume sold was offset inpart by an increase in the volume of bunker fuel sold as a result of ourcontinuing efforts to develop our current bunker business and to expand intonew bunker markets.

 

*Selling,General and Administrative*

 

SG&Aexpenses increased by $1.0 million, or 10%, to $10.6 million for the threemonths ended March 31, 2006 compared to $9.6 million for the same period in2005.  The increase was primarily due toaccrued bonuses and executive salaries of $.3 million and expenses associatedwith becoming a public company. Specifically, we recorded increased expenses in audit fees of $.1million, tax preparation and analysis of $.1 million, director and officerinsurance and fees of $.2 million and Sarbanes-Oxley 404 compliance, planningand documentation activities of $.3 million.

 

22

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*Operating Expenses*

* *

Operatingexpenses increased by $.5 million, or 10%, to $5.6 million for the three monthsended March 31, 2006 compared to $5.1 million for the same period in 2005.  The increase was primarily due to pipelinerepair expenses of approximately $.3 million and an increase in energy costs of$.1 million associated with product handling at the terminal in Chelsea,Massachusetts, a $.1 million increase in rent for additional tankage at theCapitol Terminal in East Providence, Rhode Island, and an increase of $.1million in energy costs associated with product handling at the terminal inPortland, Maine.

 

*Amortizationexpense*

 

Amortizationexpense was $.4 million for each of the three months ended March 31, 2006 and2005.  

 

***Interest expense***

*** ***

***Interestexpense for the three months ended March 31, 2006 increased by $.3 million, or15%, to $2.3 million compared to $2.0 million for the same period in 2005.  We attribute the***increase to a rise in themarket prices for products and the resulting increased costs of carryinginventory and accounts receivable.

*** ***

**Liquidity and CapitalResources**

** **

***Liquidity***

** **

Our primary liquidity needs are to fund our capital expenditures andour working capital requirements.  Cashgenerated from operations and our working capital revolving credit facilityprovides our primary sources of liquidity. Working capital was $184.7 million at March 31, 2006 compared to $228.7million at December 31, 2005.  

 

***CapitalExpenditures***

 

Our terminalling operations require investments to expand, upgrade orenhance existing operations and to meet environmental and operationsregulations.  Our capital requirementsprimarily consist of maintenance capital expenditures and capital improvementexpenditures.  Maintenance capitalexpenditures represent capital expenditures to replace partially or fullydepreciated assets to maintain the operating capacity of, or sales generatedby, existing assets and extend their useful lives, such as expendituresrequired to maintain equipment reliability, tankage and pipeline integrity andsafety, and to address environmental regulations.  Capital improvement expenditures includeexpenditures to acquire assets to grow our business and to expand existingfacilities, such as projects that increase operating capacity by increasingtankage or adding terminals.  Repair andmaintenance expenses associated with existing assets that are minor in natureand do not extend the useful life of existing assets are charged to operatingexpenses as incurred.  We incurred atotal of approximately $.8 million and $.2 million in maintenance capitalexpenditures for the three months ended March 31, 2006 and 2005, respectively.

 

We anticipate that such maintenance capital expenditures will be fundedwith cash generated by operations.  Weanticipate that future capital improvement requirements will be providedthrough long-term borrowings or other debt financings and/or equityofferings.  We believe that we havesufficient liquid assets, cash flow from operations and borrowing capacityunder our credit agreement to meet our financial commitments, debt serviceobligations, contingencies and anticipated capital expenditures.  However, we are subject to business andoperational risks that could adversely affect our cash flow.  A material decrease in our cash flows wouldlikely produce a corollary adverse effect on our borrowing capacity.

 

23

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***CashFlows***

 

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

 

| ** **                                 | ** ** | **Successor**                     | ** ** | **Predecessor** | ** ** |
|--------------------------------------------|------------|-----------------------------------|------------|-----------------|------------|
| ** **                                 | ** ** | **Three Months Ended  March 31,** | ** ** |
| ** **                                 | ** ** | **2006**                          | ** ** | **2005**        | ** ** |
| ** **                                 | ** ** | **Consolidated**                  | ** ** | **Combined**    | ** ** |
| ** **                                 | ** ** | ** **                        | ** ** | ** **      | ** ** | ** ** | ** ** |
| Net  cash provided by operating activities |       | $                                 | 56,589     |            | $          | 40,775 |   |
| Net  cash used in investing activities     |       | $                                 | (829       | )               | $          | (160 | ) |
| Net  cash used in by financing activities  |       | $                                 | (56,706    | )               | $          | (41,968 | ) |

 

Net cash provided by operating activities for the three months endedMarch 31, 2006 reflects the contraction of our balance sheet from decreases inthe carrying values of accounts receivable, inventories and accounts payable aswe exit our peak season.

 

Net cash used in investing activities for the three months ended March31, 2006 primarily reflects property and equipment purchases.

 

Net cash used in financing activities primarily reflects the use of ourrevolving credit facility to finance business operations, as well as a cash distribution of $4.7million paid in February 2006 for the fourth quarter of 2005 to our common andsubordinated unitholders.

 

***Credit Agreement***

 

In November 2005, we, our general partner, our operating company andour operating subsidiaries amended our four-year senior secured creditagreement to increase total available commitments thereunder from $400.0 millionto $500.0 million.  The working capitalrevolving credit facility was increased by $100.0 million, comprising a $50.0million increase in the permanent working capital revolving credit facilitycommitment and a new seasonal overline facility of $50.0 million (which is availableeach year only during the period between September 1stand June 30th.)  As of March31, 2006, we had borrowings outstanding under our working capital revolvingcredit facility of $129.7 million and outstanding letters of credit of $55.0million, for a total indebtedness of $184.7 million.

 

The credit facilities are available to fund working capital, makeacquisitions and provide payment for general partnership purposes. There arethree facilities under our credit agreement:

 

•    aworking capital revolving credit facility to be used for working capitalpurposes and letters of credit in the principal amount equal to the lesser ofour borrowing base and $450.0 million, of which two $50.0 million seasonaloverline facilities are available each year only during the period betweenSeptember 1st and June 30th; 

•    a$35.0 million acquisition facility to be used for funding acquisitions similarto our business line that have a purchase price of $25.0 million or less or$35.0 million or less in the aggregate in any 12-month period; and

•    a$15.0 million revolving credit facility to be used for general purposes,including payment of distributions to our unitholders.

 

Our obligations under the credit agreement are secured by substantiallyall of our assets and the assets of our operating company and operatingsubsidiaries.

 

Indebtedness under the credit agreement is guaranteed by our generalpartner.  Pursuant to the agreement,interest on borrowings under our working capital revolving credit, acquisitioncredit, and revolving credit facilities is payable at (1) the Eurodollar rate,plus 1%, 13⁄4% or 1**1⁄2** %, respectively, (2) the cost offunds rate,****plus 1%, 13⁄4% or 11⁄2 %,respectively**,** or (3) the bank’s base rate, atour option (the average rate for the three months ended March 31, 2006 wasapproximately 5.5%).  We incur a letterof credit fee of 1% per annum for each letter of credit issued.  In addition, we incur a commitment fee on the unusedportion of the three facilities (including any seasonal overline facility exercisedby us) under the credit agreement at a rate of 25 basis points per annum, afacility fee of 10 basis points per annum on any unexercised seasonal overlinefacility during the period between September 1st and June 30th,and a seasonal overline fee of $30,000 each time we elect to exercise either ofthe seasonal overline facilities.  Thecredit agreement will mature in October of 2009.  At that time, the credit agreement willterminate and all outstanding amounts thereunder will be due and payable, unlessthe credit agreement is amended.

 

24

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The credit agreement prohibits us from making distributions tounitholders if any potential default or event of default, as defined in thecredit agreement, occurs or would result from the distribution.  In addition, the credit agreement containsvarious covenants that may limit, among other things, our ability to:

 

•     grantliens;

 

•     makecertain loans or investments;

 

•     incuradditional indebtedness or guarantee other indebtedness;

 

•     makeany material change to the nature of our business or undergo a fundamentalchange;

 

•     makeany material dispositions;

 

•     acquireanother company;

 

•     enterinto a merger, consolidation, sale leaseback transaction or purchase of assets;

 

•     makedistributions if any potential default or event of default occurs; or

 

•     makecapital expenditures in excess of specified levels.

 

The credit agreement also contains financial covenantsrequiring us to maintain:

 

•     minimumworking capital of $25.0 million through March 31, 2006 and $30.0 millionthereafter;

 

•     minimumEBITDA (as defined in the credit agreement) of $20.0 million;

 

•     aminimum EBITDA less capital expenditures to interest coverage ratio of 2.75 to1; and

 

•     amaximum leverage to minimum EBITDA ratio of 2.5 to 1 with respect to theaggregate amount of borrowings outstanding under the $15.0 million revolvingcredit facility and the $35.0 million acquisition facility and other fundedindebtedness.

 

If an event of default exists under the credit agreement, the lendersare able to accelerate the maturity of the credit agreement and exercise otherrights and remedies.  Each of thefollowing could be an event of default:

 

•     failureto pay any principal when due or any interest, fees or other amounts when due;

 

•     failureof any representation or warranty to be true and correct in any materialrespect;

 

•     failureto perform or otherwise comply with the covenants in the credit agreement or inother loan documents to which we are a borrower;

 

•     anydefault in the performance of any obligation or condition beyond the applicablegrace period relating to any other indebtedness of more than $2.0 million ifthe effect of the default is to permit or cause the acceleration of theindebtedness;

 

•     ajudgment default for monetary judgments exceeding $2.0 million or a defaultunder any nonmonetary judgment if such default could have a material adverseeffect on us;

 

•     achange in management or ownership control; and

 

•     an ERISAviolation or a bankruptcy or insolvency event involving us, our general partneror any of our subsidiaries.

 

The credit agreement limits distributions to our unitholders toavailable cash, and borrowings to fund such distributions are only permittedunder the $15.0 million revolving credit facility.  The $15.0 million revolving credit facilityis subject to an annual “clean-down” period, requiring us to reduce the amountoutstanding under the $15.0 million revolving credit facility to $0 for 30consecutive calendar days in each calendar year.

 

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***Bridgeport Terminal***

 

In May of 2006, the Partnership completed its acquisition of a refinedpetroleum products terminal in Bridgeport, Connecticut from ConnecticutPetroleum Wholesalers and one of its affiliates.  The terminal has storage capacity forapproximately 109,000 barrels of refined products, including #2 fuel oil andlow sulfur diesel, and additional products. 

 

***Off-Balance Sheet Arrangements***

 

We have no off-balance sheet arrangements.

 

***Critical Accounting Policies and Estimates***

** **

Management’s Discussion and Analysis of Financial Condition and Resultsof Operations discusses our consolidated/combined financial statements, whichhave been prepared in accordance with GAAP. The preparation of these financial statements requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults may differ from these estimates under different assumptions orconditions.  

 

These estimates are based on our knowledge and understanding of currentconditions and actions that we may take in the future.  Changes in these estimates will occur as aresult of the passage of time and the occurrence of future events.  We have identified the following estimates that,in our opinion, are subjective in nature, require the exercise of judgment, andinvolve complex analysis:  inventory,leases, revenue recognition, derivative financial instruments and environmentaland other liabilities.

 

The significant accounting policies and estimates that we have adoptedand followed in the preparation of our consolidated/combined financialstatements are detailed in Item 7, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Critical Accounting Policiesand Estimates” and Note 2 of Notes to Financial Statements, “Summary ofSignificant Accounting Policies” included in our Annual Report on Form 10-K forthe fiscal year ended December 31, 2005. There have been no subsequent changes in these policies and estimatesthat had a significant impact on our financial condition and results ofoperations for the periods covered in this report.

 

**Recently Issued Accounting Standards**

** **

A description and related impact expected from the adoption of certainnew accounting pronouncements is provided in Note 11 of Notes to FinancialStatements.

 

**Item 3.****        Quantitativeand Qualitative Disclosures about Market Risk**

 

Market risk is the risk of loss arising from adverse changes in marketrates and prices.  The principal marketrisks to which we are exposed are interest rate risk and commodity risk.  We utilize various derivative instruments tomanage exposure to commodity risk. Because the outstanding amount under our credit facility fluctuates dueto commodity prices and the seasonality of our business, we have chosencurrently and historically not to enter into any hedging instruments related toour variable rate debt.

 

***Interest Rate Risk***

 

We utilize variable rate debt and are exposed to market risk due to thefloating interest rates on our current credit facility and term loan.  Therefore, from time to time, we may utilizeinterest rate swaps and collars to hedge interest obligations on specific andanticipated debt issuances.  We had no interest rate hedging instrumentsoutstanding as of March 31, 2006.  Borrowingsunder our working capital revolving credit, acquisition credit and revolvingcredit facilities currently bear interest at our option at (1) the Eurodollarrate, plus 1%, 13⁄4% or 11⁄2 %, respectively, (2) the cost of funds rate, plus 1%,13⁄4% or 11⁄2 %, respectively, or (3) the bank’s base rate, at our option.  As of March 31, 2006, we had borrowingsoutstanding under our working capital revolving credit facility of $129.7million.  The impact of a 1% increase inthe interest rate on this amount of debt would have resulted in an increase ininterest expense, and a corresponding decrease in our results of operations, ofapproximately $1.3 million annually, assuming, however, that our indebtednessremained constant throughout the year.

 

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***Commodity Risk***

 

We hedge our exposure to price fluctuations with respect to refinedpetroleum products in storage and expected purchases and sales of thesecommodities.  The derivative instrumentsutilized consist primarily of futures and option contracts traded on the NYMEXand over-the-counter transactions, including swap contracts entered into withestablished financial institutions and other credit-approved energycompanies.  Our policy is generally topurchase only products for which we have a market and to structure our salescontracts so that price fluctuations do not materially affect the profit wereceive.  While our policies are designedto minimize market risk, some degree of exposure to unforeseen fluctuations inmarket conditions remains.  Except forthe controlled trading program discussed below, we do not acquire and holdfutures contracts or other derivative products for the purpose of speculatingon price changes that might expose us to indeterminable losses.

 

While we seek to maintain a position that is substantially balancedwithin our product purchase activities, we may experience net unbalancedpositions for short periods of time as a result of variances in daily sales andtransportation and delivery schedules as well as logistical issues associatedwith inclement weather conditions.  Inconnection with managing these positions and maintaining a constant presence inthe marketplace, both necessary for our business, we engage in a controlledtrading program for up to an aggregate of 250,000 barrels of refined petroleumproducts.

 

We enter into future contracts to minimize or hedge the impact ofmarket fluctuations on our purchase and fixed forward sales of refinedpetroleum products.  Any hedgeineffectiveness is reflected in our results of operations.  We utilize the NYMEX, which is a regulatedexchange for energy products that it trades, thereby reducing potentialdelivery and supply risks.  Generally,our practice is to close all NYMEX positions rather than to make or receivephysical deliveries.  With respect toother energy products, we enter into derivative agreements with counterpartiesthat we believe have a strong credit profile, in order to hedge marketfluctuations and/or lock-in margins relative to our commitments.

 

At March 31, 2006, the fair value of all of our commodity riskderivative instruments and the change in fair value that would be expected froma 10% price decrease are shown in the table below (in thousands):

 

Gain (loss):

 
| ** **                    | ** ** | **Fair Value at  March 31, 2006** | ** ** | **Effect of 10%****Price Decrease** | ** ** |
|-------------------------------|------------|-----------------------------------|------------|-------------------------------------|------------|
| ** **                    | ** ** | ** **                        | ** ** | ** **                          | ** ** |
| NYMEX contracts               |       | $                                 | (2,484     | )                                   | $          | 2,040 |   |
| Swaps, options and other, net |       | 1,769                             |       | 5,328                               |       |
|                          |       | $                                 | (715       | )                                   | $          | 7,368 |   |

 

The fair values of the futures contracts are based on quoted marketprices obtained from the NYMEX.  The fairvalue of the swaps and option contracts are estimated based on quoted pricesfrom various sources such as independent reporting services, industrypublications and brokers.  These quotesare compared to the contract price of the swap, which approximates the gain orloss that would have been realized if the contracts had been closed out at March31, 2006.  For positions whereindependent quotations are not available, an estimate is provided, or theprevailing market price at which the positions could be liquidated isused.  All hedge positions offsetphysical exposures to the spot market; none of these offsetting physicalexposures are included in the above table. Price-risk sensitivities were calculated by assuming an across-the-board10% decrease in price regardless of term or historical relationships betweenthe contractual price of the instruments and the underlying commodityprice.  In the event of an actual 10%change in prompt month prices, the fair value of our derivative portfolio wouldtypically change less than that shown in the table due to lower volatility inout-month prices.  We have a daily marginrequirement to maintain a cash deposit with our broker based on the prior day’smarket results on open futures contracts. The balance of this deposit will fluctuate based on our open marketpositions and the commodity exchange’s requirements.  The required brokerage margin balance was$4.8 million at March 31, 2006.

 

We are exposed to credit loss in the event of nonperformance bycounterparties of forward contracts, options and swap agreements, but do notanticipate nonperformance by any of these counterparties.  Futures contracts, the primary derivativeinstrument utilized, are traded on regulated exchanges, greatly reducingpotential credit risks.  Exposure on swapand certain option agreements is limited to the amount of the recorded fairvalue as of the balance sheet dates.  Weutilize primarily one broker for all derivative transactions and the right ofoffset exists.  Accordingly, the fairvalue of all derivative instruments is displayed on a net basis.

 

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**Item 4.****        Controls and Procedures**

 

In designing and evaluating controls andprocedures, our management recognizes that any controls and procedures, nomatter how well designed and operated, can provide only reasonable assurance ofachieving the desired control objectives, and management is required to applyits judgment in evaluating the cost-benefit relationship of possible controlsand procedures.

 

Our management, with the participation of ourprincipal executive officer and principal financial officer, evaluated theeffectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”))as of the fiscal quarter ended March 31, 2006. Based on this evaluation, our principal executive officer and principalfinancial officer have concluded that our disclosure controls and proceduresare effective to ensure that the information required to be disclosed by us inthe reports we file or submit under the Exchange Act is recorded, processed,summarized and reported within the time periods specified in SEC rules andforms.

 

There has not been any change in our internal control over financial reporting(as defined in Rule 13a-15(f) under the Exchange Act) that occurred during thefiscal quarter ended March 31, 2006 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II. OTHER INFORMATION**

 

**Item 1.****        Legal Proceedings**

 

***General***

 

Although we may, from time to time, be involved in litigation andclaims arising out of our operations in the normal course of business, we donot believe that we are a party to any litigation that will have a materialadverse impact on our financial condition or results of operations.  Except as described below, we are not awareof any significant legal or governmental proceedings against us, or contemplatedto be brought against us.  We maintaininsurance policies with insurers in amounts and with coverage and deductiblesas our general partner believes are reasonable and prudent.  However, we can provide no assurance thatthis insurance will be adequate to protect us from all material expensesrelated to potential future claims for personal and property damage or thatthese levels of insurance will be available in the future at economical prices.

 

***Environmental***

 

Global Companies LLC, in addition to several affiliates, has been namedas one of over 50 defendants in two lawsuits alleging methyl tertiary-butylether (“MTBE”) contamination of groundwater in Massachusetts.  MTBE is an oxygenate that has been used extensivelyto reduce motor vehicle tailpipe emissions. In the cases of Town of Duxbury, et al. v. Amerada Hess Corp., et al.,filed December 31, 2003, and City of Lowell v. Amerada Hess Corp., et al.,filed December 30, 2004, plaintiffs allege that manufacturers, refiners andothers involved in the distribution of gasoline containing MTBE are liable forthe costs of investigating possible MTBE groundwater contamination, treatingsuch contaminated groundwater where found, and related relief including trebledamages and injunctive relief.  The plaintiffsin these cases generally claim to be public water providers or municipal orother government authorities.  Thesecases have been consolidated in multi-district litigation with over 60 otherMTBE cases in federal court in the Southern District of New York.  We intend to vigorously defend thesecases.  We do not believe that thesecases will have a material impact on our operations although we can provide noassurances in this regard.

 

On November 29, 2004, a consent decree was lodged by the U.S. Departmentof Justice in the federal District Court for Massachusetts whereby GlobalCompanies LLC and Global Petroleum Corp. settled alleged violations of CleanAir Act regulations related to fuel quality specifications.  This consent decree was entered by the courton January 21, 2005.  As part of thissettlement, Global Companies LLC has paid a $500,000 civil penalty andinstituted a compliance program for three years to ensure compliance with CleanAir Act fuel quality specifications.  Thealleged violations stemmed from the importation of finished conventionalgasoline, which was not a substantial part of our operations at the time of thealleged violations.  We do not believethat compliance with the terms of the consent decree will result in materialcosts.

 

***Other***

 

On September 15, 2005, the Office of the Attorney General of theCommonwealth of Massachusetts issued a Civil Investigative Demand to us inconnection with an investigation of gasoline distributors and retailers inMassachusetts in the wake of Hurricane Katrina. We believe that the Attorney General’s office has issued similar demandsto other distributors and retailers.  Wehave taken steps to comply with the demand. While we cannot predict the outcome of the investigation, we do notexpect that the outcome will have a material adverse effect on us.

 

On November 22, 2005, the U.S. Federal Trade Commission issued a CivilInvestigative Demand to us in connection with an investigation of petroleumproducts pricing by refiners and distributors. We believe that the Federal Trade Commission has issued similar demandsto the major petroleum products refiners and other distributors.  We have taken steps to comply with thedemand.  While we cannot predict theoutcome of the investigation, we do not expect that the outcome will have amaterial adverse effect on us.

 

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**Item 1A.****     Risk Factors**

 

There have been no materialchanges to the Risk Factors disclosed in our Annual Report on Form 10-K for thefiscal year ended December 31, 2005.

 

**Item 6.****        Exhibits**

 
| 31.1       | — | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer of  Global GP LLC, general partner of Global Partners LP. |
|------------|--------|----------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                             |
| 31.2       | — | Rule  13a-14(a)/15d-14(a) Certification of Principal Financial Officer of  Global GP LLC, general partner of Global Partners LP. |
|       |   |                                                                                                                             |
| 32.1† | — | Section 1350  Certification of Chief Executive Officer of Global GP LLC, general  partner of Global Partners LP.                 |
|       |   |                                                                                                                             |
| 32.2† | — | Section 1350  Certification of Chief Financial Officer of Global GP LLC, general  partner of Global Partners LP.                 |

 

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**†****      **Not deemed “filed” for purposes of Section 18of the Securities Exchange Act of 1934 or otherwise subject to the liability ofthat 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 theundersigned thereunto duly authorized.

 

 
|                       | **GLOBAL PARTNERS LP** |
|----------------------------|------------------------|
|                       | By:                    | Global GP LLC, |
|                       |                   | its general partner |
|                       |                   |   |
|                       |                   |   |
| Dated:   May 15, 2006 |                   | By: | /s/ Eric Slifka |   |
|                       |                   |   | Eric Slifka |
|                       |                   |   | President and Chief Executive Officer |
|                       |                   |   | (Principal Executive Officer) |
|                       |                   |   |
|                       |                   |   |
| Dated:   May 15, 2006 |                   | By: | /s/ Thomas A. McManmon, Jr. |   |
|                       |                   |   | Thomas A. McManmon, Jr. |
|                       |                   |   | Executive Vice President and Chief  Financial Officer |
|                       |                   |   | (Principal Financial Officer) |

 

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**INDEXTO EXHIBITS**

 
| **Exhibit  Number** | ** ** | ** ** | **Description**                                                                                                                  |
|---------------------|------------|------------|----------------------------------------------------------------------------------------------------------------------------------|
|                |       |       |                                                                                                                             |
| 31.1                |       | —     | Rule  13a-14(a)/15d-14(a) Certification of Principal Executive Officer of  Global GP LLC, general partner of Global Partners LP. |
|                |       |       |                                                                                                                             |
| 31.2                |       | —     | Rule  13a-14(a)/15d-14(a) Certification of Principal Financial Officer of  Global GP LLC, general partner of Global Partners LP. |
|                |       |       |                                                                                                                             |
| 32.1†          |       | —     | Section 1350  Certification of Chief Executive Officer of Global GP LLC, general  partner of Global Partners LP.                 |
|                |       |       |                                                                                                                             |
| 32.2†          |       | —     | Section 1350  Certification of Chief Financial Officer of Global GP LLC, general  partner of Global Partners LP.                 |

 

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

 

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