**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

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**FORM 10-Q**

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**(Mark One)**

**x**                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934       

**For the quarterly period ended June 30, 2007**

**OR**

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

**For the transition periodfrom              to**

**Commission file number 001-32593**

**GlobalPartners LP**(Exact name of registrant as specified inits 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 executiveoffices, 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 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

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 |   | Accelerated  filer x |   | Non-accelerated filer o |
|--------------------------------|--------|---------------------------|--------|------------------------------|

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o No x

The issuer had 7,428,139 common units and 5,642,424 subordinated unitsoutstanding as of August 1, 2007.

 

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**TABLE OF CONTENTS**

 
| **PART I.**                                                                                   | **FINANCIAL INFORMATION**                                                                       |
|-----------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                                                                                          |
| **Item 1.**                                                                                   | **Financial Statements**                                                                        |
|                                                                                          |
| Consolidated Balance  Sheets as of June 30, 2007 and December 31, 2006                        |
|                                                                                          |
| Consolidated  Statements of Income for the three and six months ended June 30, 2007 and  2006 |
|                                                                                          |
| Consolidated  Statements of Cash Flows for the six months ended June 30, 2007 and 2006        |
|                                                                                          |
| Consolidated  Statements of Partners’ Equity for the six months ended June 30, 2007      |
|                                                                                          |
| 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.    FinancialStatements**

**GLOBAL PARTNERS LP**

**CONSOLIDATED BALANCE SHEETS**

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

**(Unaudited)**

** **
| ** **                                                                                                                   | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| **Assets**                                                                                                                   | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                              |       |                    |       |                        |       |
| Cash and cash  equivalents                                                                                                   |       | $                       | 2,527      |                        | $          | 3,861 |   |
| Accounts receivable,  net                                                                                                    |       | 272,993                 |       | 202,580                     |       |
| Accounts  receivable—affiliates                                                                                         |       | 5,506                   |       | 1,988                       |       |
| Inventories                                                                                                                  |       | 239,477                 |       | 288,067                     |       |
| Available for  sale securities                                                                                               |       | —                  |       | 13,913                      |       |
| Brokerage margin  deposits                                                                                                   |       | 4,591                   |       | 625                         |       |
| Fair value of  forward fixed contracts                                                                                       |       | 944                     |       | 66,115                      |       |
| Prepaid expenses  and other current assets                                                                                   |       | 10,563                  |       | 18,924                      |       |
| Total current  assets                                                                                                        |       | 536,601                 |       | 596,073                     |       |
| Property and equipment,  net                                                                                                 |       | 142,885                 |       | 31,657                      |       |
| Intangible assets, net                                                                                                       |       | 8,360                   |       | 9,076                       |       |
| Other assets                                                                                                                 |       | 3,454                   |       | 2,081                       |       |
| Total assets                                                                                                                 |       | $                       | 691,300    |                        | $          | 638,887 |   |
| **Liabilities  and partners’ equity**                                                                                   | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                         |       |                    |       |                        |       |
| Accounts payable                                                                                                             |       | $                       | 232,898    |                        | $          | 222,034 |   |
| Revolving line  of credit—current portion                                                                               |       | 98,100                  |       | 188,700                     |       |
| Notes payable,  other—current portion                                                                                   |       | 319                     |       | 319                         |       |
| Environmental  liabilities—current portion                                                                              |       | 500                     |       | —                      |       |
| Accrued expenses  and other current liabilities                                                                              |       | 50,459                  |       | 35,573                      |       |
| Income taxes  payable                                                                                                        |       | —                  |       | 1,164                       |       |
| Obligations on  forward fixed contracts and other derivatives                                                                |       | 10,517                  |       | —                      |       |
| Total current  liabilities                                                                                                   |       | 392,793                 |       | 447,790                     |       |
| Revolving line of  credit—less current portion                                                                          |       | 122,000                 |       | 82,000                      |       |
| Notes payable,  other—less current portion                                                                              |       | 1,083                   |       | 1,239                       |       |
| Environmental  liabilities—less current portion                                                                         |       | 7,500                   |       | —                      |       |
| Accrued pension benefit  cost                                                                                                |       | 3,511                   |       | 3,170                       |       |
| Deferred compensation                                                                                                        |       | 1,388                   |       | 1,429                       |       |
| Other long-term  liabilities                                                                                                 |       | 20                      |       | 20                          |       |
| Total  liabilities                                                                                                           |       | 528,295                 |       | 535,648                     |       |
| **Partners’  equity**                                                                                                   | ** ** | ** **              | ** ** | ** **                  | ** ** |
| Common  unitholders (7,428,139 units issued and outstanding   at June 30, 2007 and 5,642,424 at December 31, 2006) |       | 164,554                 |       | 104,212                     |       |
| Subordinated  unitholders (5,642,424 units issued and outstanding   at June 30, 2007 and December 31, 2006)        |       | (2,480                  | )          | (13,672                     | )          |
| General partner  interest (230,303 equivalent units outstanding   at June 30, 2007 and December 31, 2006)          |       | (108                    | )          | (560                        | )          |
| Accumulated  other comprehensive income                                                                                      |       | 1,039                   |       | 13,259                      |       |
| Total partners’  equity                                                                                                 |       | 163,005                 |       | 103,239                     |       |
| Total liabilities and  partners’ equity                                                                                 |       | $                       | 691,300    |                        | $          | 638,887 |   |

 

*The accompanying notes are anintegral part of these financial statements.*

1

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**GLOBAL PARTNERS LPCONSOLIDATED STATEMENTS OF INCOME(In thousands, except per unit data)(Unaudited)**
| ** **                                                                    | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                    | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Sales                                                                         |       | $                                               | 1,384,090  |                                          | $          | 1,031,353 |   | $ | 2,957,266 |   | $ | 2,382,376 |   |
| Cost of sales                                                                 |       | 1,362,468                                       |       | 1,010,709                                     |       | 2,893,392 |   | 2,329,515 |   |
| Gross profit                                                                  |       | 21,622                                          |       | 20,644                                        |       | 63,874 |   | 52,861 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Costs and operating  expenses:                                                |       |                                            |       |                                          |       |   |   |   |   |
| Selling, general  and administrative expenses                                 |       | 11,458                                          |       | 9,416                                         |       | 24,864 |   | 20,344 |   |
| Operating  expenses                                                           |       | 6,310                                           |       | 5,266                                         |       | 12,200 |   | 10,817 |   |
| Amortization  expenses                                                        |       | 358                                             |       | 406                                           |       | 716 |   | 812 |   |
| Total costs and  operating expenses                                           |       | 18,126                                          |       | 15,088                                        |       | 37,780 |   | 31,973 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Operating income                                                              |       | 3,496                                           |       | 5,556                                         |       | 26,094 |   | 20,888 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Interest expense                                                              |       | (2,523                                          | )          | (1,786                                        | )          | (5,839 | ) | (4,106 | ) |
| Other income                                                                  |       | —                                          |       | —                                        |       | — |   | 356 |   |
| Gain on sale of  investment                                                   |       | —                                          |       | —                                        |       | 14,118 |   | — |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Income before income  tax expense                                             |       | 973                                             |       | 3,770                                         |       | 34,373 |   | 17,138 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Income tax expense                                                            |       | (363                                            | )          | (290                                          | )          | (888 | ) | (970 | ) |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                    |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Less:                                                                         |       |                                            |       |                                          |       |   |   |   |   |
| General  partner’s interest in net income                                |       | (11                                             | )          | (70                                           | )          | (668 | ) | (324 | ) |
| Limited  partners’ interest in net income                                |       | $                                               | 599        |                                          | $          | 3,410 |   | $ | 32,817 |   | $ | 15,844 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Net (loss) income per  limited partner unit, basic and diluted(1)             |       | $                                               | (1.28      | )                                             | $          | 0.30 |   | $ | 0.47 |   | $ | 1.15 |   |
|                                                                          |       |                                            |       |                                          |       |   |   |   |   |
| Weighted average  limited partners’ units outstanding, basic and diluted |       | 12,325                                          |       | 11,285                                        |       | 11,808 |   | 11,285 |   |

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(1)             SeeNote 3 for net (loss) income per limited partner unit calculation whichincludes a non-cash reduction in net income available to limited partners underEITF 98-05 (See Note 12).

*The accompanying notes are anintegral part of these financial statements.*

2

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**GLOBAL PARTNERS LPCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)**
| ** **                                                                         | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
|                                                                               |       |                                          |       |   |   |
| **Operating activities**                                                           |       |                                          |       |   |   |
| Net income                                                                         |       | $                                             | 33,485     |   | $ | 16,168 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                          |       |   |   |
| Depreciation and  amortization                                                     |       | 3,126                                         |       | 1,960 |   |
| Amortization of  deferred financing fees                                           |       | 210                                           |       | 200 |   |
| Disposition of  property and equipment and other                                   |       | (1                                            | )          | 175 |   |
| Gain on sale of  investment                                                        |       | (14,118                                       | )          | — |   |
| Changes in  operating assets and liabilities:                                      |       |                                          |       |   |   |
| Accounts  receivable                                                               |       | (70,413                                       | )          | 69,061 |   |
| Accounts  receivable — affiliate                                              |       | (3,518                                        | )          | 222 |   |
| Inventories                                                                        |       | 48,590                                        |       | (3,223 | ) |
| Broker margin  deposits                                                            |       | (3,965                                        | )          | 3,694 |   |
| Prepaid  expenses, all other current assets and other assets                       |       | 7,249                                         |       | (4,842 | ) |
| Accounts payable                                                                   |       | 10,864                                        |       | (75,295 | ) |
| Income taxes  payable                                                              |       | (1,164                                        | )          | (461 | ) |
| Accrued expenses  and all other current liabilities                                |       | 15,264                                        |       | 4,580 |   |
| Change in fair  value of forward fixed contracts                                   |       | 75,688                                        |       | — |   |
| Net cash provided by  operating activities                                         |       | 101,297                                       |       | 12,239 |   |
|                                                                               |       |                                          |       |   |   |
| **Investing activities**                                                           |       |                                          |       |   |   |
| Terminal acquisitions                                                              |       | (102,620                                      | )          | (2,348 | ) |
| Proceeds from sale of  investment                                                  |       | 15,262                                        |       | — |   |
| Capital expenditures                                                               |       | (3,019                                        | )          | (3,165 | ) |
| Proceeds from sale of  property and equipment                                      |       | 2                                             |       | 19 |   |
| Net cash used in investing  activities                                             |       | (90,375                                       | )          | (5,494 | ) |
|                                                                               |       |                                          |       |   |   |
| **Financing activities**                                                           |       |                                          |       |   |   |
| Proceeds from common  unit issuance, net of discount and fees                      |       | 49,099                                        |       | — |   |
| (Payments on) proceeds  from credit facilities, net                                |       | (50,600                                       | )          | 2,200 |   |
| Payments on note  payable, other                                                   |       | (157                                          | )          | (147 | ) |
| Distributions to  partners                                                         |       | (10,598                                       | )          | (9,627 | ) |
| Net cash used in  financing activities                                             |       | (12,256                                       | )          | (7,574 | ) |
|                                                                               |       |                                          |       |   |   |
| Decrease in cash and  cash equivalents                                             |       | (1,334                                        | )          | (829 | ) |
| Cash and cash  equivalents at beginning of period                                  |       | 3,861                                         |       | 1,769 |   |
| Cash and cash equivalents  at end of period                                        |       | $                                             | 2,527      |   | $ | 940 |   |
|                                                                               |       |                                          |       |   |   |
| **Supplemental information**                                                       |       |                                          |       |   |   |
| Cash paid during the period for interest                                           |       | $                                             | 5,506      |   | $ | 4,070 |   |

 

The accompanyingnotes are an integral part of these financial statements.

3

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**GLOBAL PARTNERS LPCONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY(In thousands)(Unaudited)**
| ** **                                                                       | ** ** | ** **      | ** ** | ** **       | ** ** | ** **       | ** ** | ** **   | ** ** | **Accumulated**   | ** ** | ** **         | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------|------------|------------------|------------|------------------|------------|--------------|------------|-------------------|------------|--------------------|------------|
| ** **                                                                       | ** ** | ** **      | ** ** | ** **       | ** ** | ** **       | ** ** | **General**  | ** ** | **Other**         | ** ** | **Total**          | ** ** |
| ** **                                                                       | ** ** | **Common**      | ** ** | **Class B** | ** ** | **Subordinated** | ** ** | **Partner**  | ** ** | **Comprehensive** | ** ** | **Partners’** | ** ** |
| ** **                                                                       | ** ** | **Unitholders** | ** ** | **Units**        | ** ** | **Unitholders**  | ** ** | **Interest** | ** ** | **Income**        | ** ** | **Equity**         | ** ** |
| **Balance December 31, 2006**                                               |       | $               | 104,212    |             | $          | —           |       | $            | (13,672    | )                 | $          | (560               | )          | $ | 13,259 |   | $ | 103,239 |   |
| Proceeds of issuance of  Class B units, net                                      |       | —          |       | 49,099           |       | —           |       | —       |       | —            |       | 49,099             |       |
| Non-cash reduction  under EITF 98-05 on issuance of Class B units (Note 12) |       | (16,400         | )          | 16,400           |       | —           |       | —       |       | —            |       | —             |       |
| Conversion of Class B  units                                                     |       | 65,499          |       | (65,499)         |       | —           |       | —       |       | —            |       | —             |       |
| Distributions to  partners                                                       |       | (5,191)         |       | —           |       | (5,191)          |       | (216)        |       | —            |       | (10,598)           |       |
| Comprehensive income:                                                            |       |            |       |             |       |             |       |         |       |              |       |               |       |
| Net income                                                                       |       | 16,434          |       | —           |       | 16,383           |       | 668          |       | —            |       | 33,485             |       |
| Other comprehensive  income:                                                     |       |            |       |             |       |             |       |         |       |              |       |               |       |
| Unrealized gain  on NYMEX shares                                                 |       | —          |       | —           |       | —           |       | —       |       | (12,837)          |       | (12,837)           |       |
| Change in fair  value of interest rate collar                                    |       | —          |       | —           |       | —           |       | —       |       | 540               |       | 540                |       |
| Adjustment -  SFAS No. 158                                             |       | —          |       | —           |       | —           |       | —       |       | 77                |       | 77                 |       |
| Total other  comprehensive income                                                |       | 16,434          |       | —           |       | 16,383           |       | 688          |       | (12,220)          |       | 21,265             |       |
| **Balance June 30, 2007**                                                        |       | $               | 164,554    |             | $          | —           |       | $            | (2,480)    |              | $          | (108)              |       | $ | 1,039 |   | $ | 163,005 |   |

** **

The accompanyingnotes are an integral part of these financial statements.

4

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**GLOBAL PARTNERS LP**

**NOTES TO FINANCIALSTATEMENTS**

**(Unaudited)**

**Note 1.**                      Organization and Basis ofPresentation

**Organization**

Global Partners LP(the “Partnership”) is a publicly traded master limited partnership thatengages in the wholesale and commercial distribution of refined petroleumproducts and small amounts of natural gas and provides ancillary services tocompanies domestically and, on a limited basis, internationally.

The Partnershiphas four operating subsidiaries:  GlobalCompanies LLC, its subsidiary, Glen Hes Corp., Global Montello Group Corp. andChelsea Sandwich LLC (the four operating subsidiaries, collectively, the “Companies”).  The Companies (other than Glen Hes Corp.) arewholly owned by Global Operating LLC, a wholly owned subsidiary of thePartnership.  In addition, GLP FinanceCorp. (“GLP Finance”) is a wholly owned subsidiary of the Partnership.  GLP Finance has no material assets orliabilities.  Its activities will belimited to co-issuing debt securities and engaging in other activitiesincidental thereto.

On May 9,2007, the Partnership issued 1,785,715 unregistered Class B units in a privateplacement from which it received gross proceeds of $50.0 million.  The Class B units were convertible intocommon units on a one-for-one basis.  Inconnection with the issuance of the Class B units, the Partnership agreed to adiscount in the purchase price of approximately $0.8 million, which is theamount equal to the product of (i)** **the number of issued andoutstanding Class** **B units, and (ii)** **$0.4650,the amount of the Partnership’s first quarter per unit distribution that waspaid to the common and subordinated unitholders on May** **15,2007.  Such discount was paid by thePartnership to the purchasers of the Class B units substantially contemporaneouslywith the payment of the Partnership’s first quarter distribution and resultedin proceeds of $49.2** **million.  On May** **22, 2007, the Class B unitsconverted into common units on a one-for-one basis.  See Note 12 for additional information on theprivate placement.

Also on May9, 2007, the Partnership completed its acquisition of three refined petroleumproducts terminals located in Albany and Newburgh, New York and Burlington,Vermont from ExxonMobil Oil Corporation (“ExxonMobil”).  The Partnership financed the acquisitionthrough an expansion of its credit facility, proceeds from the sale of itsNYMEX Holdings shares and related NYMEX seats and the private placement ofClass B units discussed above.  See Note13 for information on the acquisition.

The Partnership’s1.73% general partner interest (reduced from 2% following the private placementof Class** **B units discussed above and inNote 12) is held by Global GP LLC, the Partnership’s general partner (the “GeneralPartner”).  The General Partner, which isowned by affiliates of the Slifka family, manages the Partnership’s operationsand activities and employs its officers and substantially all of itspersonnel.  Affiliates of the GeneralPartner, including its directors and executive officers, own 60,224 commonunits and 5,642,424 subordinated units, representing a combined 42.9% limitedpartner interest.

**Basis of Presentation**

***Interim Financial Statements***

**Theaccompanying consolidated financial statements as of June 30, 2007 and December31, 2006 and for the three and six months ended June 30, 2007 and 2006 reflectthe accounts of the Partnership.  Allintercompany balances and transactions have been eliminated.**

5

 

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The accompanying unaudited consolidated financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States (“GAAP”) and reflect all adjustments(consisting only of normal recurring adjustments) which are, in the opinion ofmanagement, necessary for a fair presentation of the financial condition andoperating results for the interim periods. The interim financial information, which has been prepared pursuant tothe rules and regulations of the Securities and Exchange Commission (“SEC”),should be read in conjunction with the consolidated financial statements forthe year ended December 31, 2006 and notes thereto contained in the Partnership’sAnnual Report on Form 10-K.  The resultsof operations for the three and six months ended June 30, 2007 are notnecessarily indicative of the results of operations that will be realized forthe entire year ending December 31, 2007.

As demand for some of the Partnership’s refined petroleum products,specifically home heating oil and residual oil for space heating purposes, isgenerally greater during the winter months, sales are generally higher duringthe first and fourth quarters of the calendar year which may result insignificant fluctuations in the Partnership’s quarterly operating results.

The consolidated balance sheet at December 31, 2006has been derived from the audited financial statements and

**Note 2.**                      Reclassification

Certain prior year amounts in the consolidatedfinancial statements and accompanying notes have been reclassified to conformto the current year presentation.

**Note 3.**                      Net (Loss) Income Per LimitedPartner Unit

The computation ofnet (loss) income per limited partner unit is based on the weighted averagenumber of common and subordinated units, or limited partner units, outstandingduring the year.  Basic and diluted net (loss)income per limited partner unit are determined by dividing net income afterdeducting the amount allocated to the general partner interest (includingincentive distributions on the incentive distribution rights held by theGeneral Partner in excess of its general partner interest) by the weightedaverage number of outstanding limited partner units during the period inaccordance with Emerging Issues Task Force 03-06, “Participating Securities andthe Two-Class Method 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 partnerunit) by an entity that has issued securities other than common stock (in thePartnership’s case, limited partner units) that contractually entitle theholder to participate in dividends and earnings of the entity when, and if, itdeclares dividends on its common stock (in the Partnership’s case,distributions on its limited partner units). Essentially, EITF 03-06 provides that in any accounting period where thePartnership’s aggregate net income exceeds its aggregate distribution for suchperiod, the Partnership is required to present net (loss) income per limitedpartner 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 thePartnership’s overall net income or other financial results; however, forperiods in which the Partnership’s aggregate net income exceeds its aggregatedistributions for such period, it will have the impact of reducing the earningsper limited partner unit.  This resultoccurs as a larger portion of the Partnership’s aggregate earnings is allocatedto the incentive distribution rights held by the General Partner, as ifdistributed, even though the Partnership makes cash distributions on the basisof cash available for distributions, not earnings, in any given accountingperiod.  In accounting periods whereaggregate net income does not exceed aggregate distributions for such period,EITF 03-06 does not have any impact on the Partnership’s net income perlimited partner unit calculation.

6

 

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The following sets forth the net (loss) incomeallocation and per unit data using this method for the periods presented (inthousands, except per unit data):
| ** **                                                                                     | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                     | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                                     | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                                           |       |                             |       |                           |       |   |   |   |   |
| Net income                                                                                     |       | $                                | 610        |                           | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Less:                                                                                          |       |                             |       |                           |       |   |   |   |   |
| General Partner’s general partner interest(1)                                             |       | (11                              | )          | (70                            | )          | (668 | ) | (324 | ) |
| Non-cash reduction under EITF 98-05  allocated to limited partners(2)                     |       | (16,400)                         |       | —                         |       | (16,400) |   | — |   |
| Net (loss) income available to limited partners                                                |       | (15,801)                         |       | 3,410                          |       | 16,417 |   | 15,844 |   |
| Dilutive impact of theoretical distribution of  earnings                                       |       | —                           |       | —                         |       | (12,405) |   | (2,872) |   |
| Net (loss) income available to limited partners  under EITF 03-06 and EITF 98-05     |       | $                                | (15,801)   |                           | $          | 3,410 |   | $ | 4,012 |   | $ | 12,972 |   |
|                                                                                           |       |                             |       |                           |       |   |   |   |   |
| Per unit data:                                                                                 |       |                             |       |                           |       |   |   |   |   |
| Net (loss) income available to limited partners                                                |       | $                                | (1.28)     |                           | $          | 0.30 |   | $ | 1.57 |   | $ | 1.40 |   |
| Dilutive impact of theoretical distribution of  earnings                                       |       | —                           |       | —                         |       | (1.10) |   | (0.25) |   |
| Net (loss) income available to limited partners  under EITF 03-06 and EITF  98-05(3) |       | $                                | (1.28)     |                           | $          | 0.30 |   | $ | 0.47 |   | $ | 1.15 |   |
|                                                                                           |       |                             |       |                           |       |   |   |   |   |
| Weighted average  limited partner units outstanding                                            |       | 12,325                           |       | 11,285                         |       | 11,808 |   | 11,285 |   |

----

(1)             OnMay 9, 2007, the general partner interest was reduced to 1.73% as a result ofthe private placement of Class B units.  Calculationincludes the effect of the private placement of Class B units and is based on aweighted average of 1.83% and 1.99% for the three and six months ended June 30,2007, respectively.  For the three andsix months ended June 30, 2006, the general partner interest was 2%.

(2)             Inconnection with the private placement of Class B units (see Note 12), thePartnership was required to take into account the effect of EITF 98-05, “Accounting forConvertible Securities with Beneficial Conversion Features or ContingentlyAdjustable Conversion Ratios” (“EITF 98-05”).  As a result, a non-cash reduction in netincome available to limited partners was recorded because the fair value of thePartnership’s common units on May** **9, 2007(the date on which the Class B units were issued) was greater than thepurchase price of the Class B units, which was established at the time of theexecution of the Unit Purchase Agreement on March 14, 2007.  Although EITF 98-05 affects net income available to limited partners, itdoes not affect net income nor does it affect total unitholders’ equity.

(3)             Perunit data includes the weighted average effect of the private placement ofClass B units which were converted to common units for the three and six monthsended June 30, 2007.  Per unit data iscalculated on a quarterly basis pursuant to EITF 03-06, therefore, perunit data for the six months ended June 30, 2007 and 2006 equals the sums ofthe respective first and second quarters.

On April 24, 2007, theboard of directors of our General Partner declared a quarterly cashdistribution of $0.4650 per unit for the period from January 1, 2007 throughMarch 31, 2007.  On July 24, 2007, theboard declared a quarterly cash distribution of $0.4725 per unit for the periodfrom April 1, 2007 through June 30, 2007. These declared cash distributions resulted in incentive distributions toour General Partner, as the holder of the incentive distribution rights, asindicated above, and enabled the Partnership to reach its second targetdistribution with respect to such incentive distribution rights.  See Note 9, “Cash Distributions” forfurther information. 

7

 

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**Note 4.**                      Inventories

The Partnershiphedges substantially all of its inventory purchases through futures and swapagreements.  Hedges are executed wheninventory is purchased and are identified with that specific inventory.  Changes in the fair value of these contracts,as well as the offsetting gain or loss on the hedged inventory item, arerecognized currently in earnings.  Allhedged inventory is valued using the lower of cost, as determined by specificidentification, or market.  Prior tosale, hedges are removed from specific barrels of inventory, and the thenunhedged inventory is sold and accounted for on a first-in, first-outbasis.  Inventories consisted of thefollowing (in thousands):

|                                                     | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                                |       |                    |       |                        |       |
| Distillates:  home heating oil, diesel and kerosene |       | $                       | 152,842    |                        | $          | 235,266 |   |
| Residual oil                                        |       | 25,466                  |       | 35,226                      |       |
| Gasoline                                            |       | 46,719                  |       | 9,870                       |       |
| Blendstock                                          |       | 14,450                  |       | 7,705                       |       |
| Total                                               |       | $                       | 239,477    |                        | $          | 288,067 |   |

 

In addition to itsown inventory, the Partnership has exchange agreements with unrelatedthird-party suppliers, whereby it may draw inventory from these other suppliersand suppliers may draw inventory from the Partnership.  Positive exchange balances are accounted foras accounts receivable.  Negativeexchange balances are accounted for as accounts payable.  Exchange transactions are valued usingcurrent quoted market prices.  The impactof exchange agreements was not material to the Partnership’s financialstatements at June 30, 2007 and December 31, 2006.

**Note 5.**                      Derivative Financial Instruments

**ThePartnership accounts for its derivatives in accordance with Statement ofFinancial Accounting Standards (“SFAS”) No. 133, “Accounting for DerivativeInstruments and Hedging Activities,” as amended (“SFAS No. 133”).  SFAS No. 133 establishes accounting andreporting standards for derivative instruments and hedging activities andrequires that an entity recognize derivatives as either assets or liabilitieson the balance sheet and measure the instruments at fair value.  Changes in the fair value of the derivativeare to be recognized currently in earnings, unless specific hedge accounting criteriaare met.**

***FairValue Hedges***

**The fairvalue of the Partnership’s 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 or deliveryof 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 inearnings.  Ineffectiveness related tothese hedging activities was immaterial at June 30, 2007.**

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 contracts,as well as offsetting gains or losses on the forward fixed purchase and salecommitments, are recognized currently in earnings.  Gains and losses on net product margin fromforward fixed purchase and sale contracts are reflected in earnings as thesecontracts mature.

8

 

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The compositionand fair value of derivative instruments relating to forward fixed contracts onthe Partnership’s consolidated balance sheet consisted of the following (inthousands):

|                                | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|--------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Futures  contracts             |       | $                       | (9,467     | )                           | $          | 57,571 |   |
| Swaps, options  and other, net |       | (106                    | )          | 8,544                       |       |
|                           |       | $                       | (9,573     | )                           | $          | 66,115 |   |

 

The Partnership also markets and sells naturalgas.  The Partnership generally conductsbusiness by entering into forward purchase commitments for natural gas onlywhen it simultaneously enters into arrangements for the sale of product forphysical delivery to third-party users. The Partnership generally takes delivery under its purchase commitmentsat the same location as it delivers to third-party users.  Through these transactions, which establishan immediate margin, the Partnership seeks to maintain a position that issubstantially balanced between firm forward purchase and salescommitments.  Natural gas is generally purchasedand sold at fixed prices and quantities. Current price quotes from actively traded markets are used in all casesto determine the contracts’ fair value. Changes in the fair value of these contracts are recognized currently inearnings as an increase or decrease in cost of sales.

The Partnershipformally documents all relationships between hedging instruments and hedgeditems after its risk management objectives and strategy for undertaking thehedge are determined.  The Partnershipcalculates 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 offsettingchanges in fair value of hedged items. The derivative instruments that qualify for hedge accounting are fairvalue hedges.

The Partnershiphas a daily margin requirement with its broker based on the prior day’s marketresults on open futures contracts.  Therequired brokerage margin balance was $4.6 million and $0.6 million at June 30,2007 and December 31, 2006, respectively.

The Partnership isexposed to credit loss in the event of nonperformance by counterparties offorward contracts, options and swap agreements, but the Partnership has nocurrent reason to expect any material nonperformance by any of thesecounterparties.  Futures contracts, theprimary derivative instrument utilized by the Partnership, are traded onregulated exchanges, greatly reducing potential credit risks.  Exposure on swap and certain optionagreements is limited to the amount of the recorded fair value as of thebalance sheet dates.  The Partnershiputilizes primarily one broker, a major financial institution, for allderivative transactions and the right of offset exists.  Accordingly, the fair value of all derivativeinstruments is presented on a net basis on the consolidated balance sheets.

***Interest Rate Hedge***

In May 2007, the Partnership executed a zero premiuminterest rate collar with a major financial institution.  The collar, which became effective on May 14,2007, is used to hedge the variability in interest payments due to changes inthe three-month LIBOR rate with respect to $100.0 million of long-termthree-month LIBOR-based borrowings. Under the collar, the Partnership capped its exposure at a maximum three-monthLIBOR rate of 5.75%.  In addition, thePartnership established a minimum floor rate of 3.75%.  The collar, which expires on May 14, 2011, isdesignated as a cash flow hedge and accounted for under the provisions of SFASNo. 133.  As of June 30, 2007, the changein fair value of the collar was an asset of approximately $0.5 million and wasrecorded in both other long-term assets and accumulated other comprehensiveincome in the accompanying consolidated balance sheet.  There was no ineffectiveness related to thecollar as of June 30, 2007.

9

 

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**Note 6.**                      Debt

The Partnershiphas a four-year senior secured credit agreement (the “Credit Agreement”) withtotal available commitments of $650.0** **million.  At June 30, 2007, there were three facilitiesunder the Credit Agreement that included the following:

·              a working capitalrevolving credit facility to be used for working capital purposes and lettersof credit in the principal amount equal to the lesser of the Partnership’sborrowing base and $550.0 million, of which two $50.0 million seasonaloverline facilities are available each year only during the period betweenSeptember 1st and June 30th;

·              an $85.0 millionacquisition facility to be used for funding acquisitions similar to thePartnership’s business line that have a purchase price of $25.0 million or lessor $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 the Partnership’s unitholders.

Inaddition, provided no Event of Default (as defined in the Credit Agreement) thenexists, the Partnership may request to increase:  (1) the acquisition facility by up to another$50.0 million, for a total acquisition facility of up to $135.0 million; and(2) the working capital revolving credit facility by up to another $100.0million, for a total working capital revolving credit facility of up to $650.0million.  Any such request for anincrease by the Partnership must be in a minimum amount of $5.0 million, and nomore than three such requests may be made for each facility.

At June 30, 2007,borrowings under the Partnership’s working capital revolving credit,acquisition and revolving credit facilities bear interest at the Partnership’soption at (1) the Eurodollar rate, plus 1%, 11⁄2% and 11⁄2%, respectively, (2) thecost of funds rate, plus 1%, 13⁄4% and 11⁄2%, respectively, or (3) the bank’s baserate.  In May 2007, the Partnershipexecuted a zero premium interest rate collar with a major financialinstitution.  The collar, which becameeffective on May 14, 2007, is used to hedge the variability in interestpayments due to changes in the three-month LIBOR rate with respect to $100.0million of long-term three-month LIBOR-based borrowings (see Note 5 for furtherdiscussion on the interest rate collar). The Partnership incurs a letter of credit fee of 1% per annum foreach letter of credit issued.  Inaddition, the Partnership incurs a commitment fee on the unused portion of thethree facilities under the Credit Agreement (including the unused portion ofeither of the seasonal overline facilities exercised by the Partnership) at arate of 25 basis points per annum, a facility fee of 10 basis points per annumon any unexercised seasonal overline facility during the period betweenSeptember 1st and June 30th and a seasonal overline fee of $30,000 eachtime the Partnership elects to exercise either of the seasonal overlinefacilities.

The CreditAgreement will mature on April 22, 2011. The Partnership classifies a portion of its revolving line of credit asa long-term liability because the Partnership has a multi-year, long-termcommitment from its bank group.  Thelong-term portion of the revolving line of credit was $122.0 million and $82.0million at June 30, 2007 and December 31, 2006, respectively, representing theamounts expected to be outstanding during the year.  In addition, the Partnership classifies aportion of its revolving line of credit as a current liability because itrepays amounts outstanding and reborrows funds based on its working capitalrequirements.  The current portion of therevolving line of credit was approximately $98.1 million and$188.7 million at June 30, 2007 and December 31, 2006, respectively,representing the amounts the Partnership expects to pay down during the courseof the year.

At June 30, 2007,availability under the Credit Agreement was reduced by the outstanding balanceof approximately $220.1** **millionand by letters of credit totaling approximately $59.0** **million.  The average interest rates for the three andsix months ended June 30, 2007 were 6.4% and 6.3%, respectively.

10

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The CreditAgreement is secured by substantially all of the assets of the Partnership andeach of the Companies and is guaranteed by the General Partner.  The Credit Agreement imposes certainrequirements including, for example, a prohibition against distributions if anypotential default or event of default as defined in the Credit Agreement, asamended, would occur, and limitations on the Partnership’s ability to grantliens, make certain loans or investments, incur additional indebtedness orguarantee other indebtedness, make any material change to the nature of thePartnership’s business or undergo a fundamental change, make any materialdispositions, acquire another company, enter into a merger, consolidation, saleleaseback transaction or purchase of assets, or make capital expenditures inexcess of specified levels.

The CreditAgreement also imposes covenants that require the Partnership to maintaincertain minimum working capital amounts, capital expenditure limits, a minimumEBITDA ratio, a minimum interest coverage ratio and a maximum leverageratio.  The Partnership was in compliancewith these covenants at June 30, 2007.

The CreditAgreement limits distributions by the Partnership to its unitholders to theamount of the Partnership’s available cash and permits borrowings to fund suchdistributions only under the $15.0 million revolving credit facility.  The revolving credit facility is subject toan annual “clean-down” period, requiring the Partnership to reduce the amountoutstanding under the revolving credit facility to $0 for 30 consecutivecalendar days in each calendar year.

**Note 7.**                      Employee Benefit Plan withRelated Party

The General Partner employs substantially all of thePartnership’s employees and charges the Partnership for their services.  The Partnership also reimburses the GeneralPartner for its contributions under the General Partner’s 401(k) Savings andProfit Sharing Plan and the General Partner’s qualified and non-qualifiedpension plans.  The Partnership’s netperiodic benefit cost for its defined benefit pension plan consisted of thefollowing components (in thousands):
|                                 | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30** | ** ** |
|---------------------------------|------------|-------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                      | ** ** | **2007**                                        | ** ** | **2006**                                     | ** ** | **2007** | ** ** | **2006** | ** ** |
| Service cost                    |       | $                                               | 203        |                                         | $          | 191 |   | $ | 407 |   | $ | 382 |   |
| Interest cost                   |       | 164                                             |       | 149                                          |       | 327 |   | 299 |   |
| Expected return  on plan assets |       | (158                                            | )          | (144                                         | )          | (316 | ) | (289 | ) |
| Net periodic  benefit cost      |       | $                                               | 209        |                                         | $          | 196 |   | $ | 418 |   | $ | 392 |   |

 

**Note 8.**                      Related Party Transactions

The Partnership isa party to a Second Amended and Restated Terminal Storage Rental and ThroughputAgreement with Global Petroleum Corp. (“GPC”), an affiliate of the Partnership,which extends through December 2013.  Theagreement is accounted for as an operating lease.  The expenses under this agreement totaledapproximately $2.1** **millionand $2.0** **million for the three monthsended June** **30,** **2007and 2006, respectively, and $4.1 million for each of the six months ended June** **30, 2007 and 2006.

Pursuant to anAmended and Restated Services Agreement with GPC, GPC provides certain terminaloperating management services to the Partnership and uses certainadministrative, accounting and information processing services of thePartnership.  The expenses from theseservices totaled approximately $18,000 and $22,000 for the three months endedJune 30, 2007 and 2006, respectively, and $36,000 and $39,000 for the sixmonths ended June** **30, 2007 and 2006,respectively.  These affiliate chargeswere recorded in selling, general and administrative expenses in theaccompanying consolidated statements of income. The agreement is for an indefinite term, and either party may terminateits receipt of some or all of the services thereunder upon 180 day’s notice atany time after January 1, 2008.

11

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Pursuant to thePartnership’s Amended and Restated Services Agreement with Alliance EnergyCorp. (“Alliance”), the Partnership also provides certain administrative,accounting and information processing services, and the use of certainfacilities, to Alliance, an affiliate of the Partnership that is 90% owned bymembers of the Slifka family.  The incomefrom these services was approximately $132,000 and $298,000 for the threemonths ended June 30, 2007 and 2006, respectively, and $264,000 and $378,000 forthe six months ended June 30, 2007 and 2006, respectively.  These intercompany fees were recorded as anoffset to selling, general and administrative expenses in the accompanyingconsolidated statements of income.  Theagreement is for an indefinite term, and Alliance may terminate its receipt ofsome or all of the services thereunder upon 180 day’s notice at any time afterJanuary 1, 2008.

The Partnershipsells refined petroleum products to Alliance at arm’s length and at prevailingmarket prices at the time of delivery. Sales to Alliance were $13.2 million and $6.5 million for the threemonths ended June 30, 2007 and 2006, respectively, and $19.0 million and $11.5million for the six months ended June 30, 2007 and 2006, respectively.

The General Partneremploys substantially all of the Partnership’s employees and charges thePartnership for their services.  Theexpenses for the three months ended June 30, 2007 and 2006, including payroll,payroll taxes and bonus accruals, were $6.3 million and $4.5 million,respectively, and $14.6 million and $11.2 million for the six months ended June30, 2007 and 2006, respectively.  ThePartnership also reimburses the General Partner for its contributions under theGeneral Partner’s 401(k) Savings and Profit Sharing Plan and the GeneralPartner’s qualified and non-qualified pension plans.

Thetable below presents trade receivables with Alliance, receivables incurred inconnection with the services agreements between Alliance and GPC and thePartnership, as the case may be, and receivables from the General Partner (inthousands):

|                                           | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
| Receivables from  Alliance                |       | $                       | 5,113      |                        | $          | 1,793 |   |
| Receivables from  GPC                     |       | 134                     |       | 81                          |       |
| Receivables from  the General Partner (1) |       | 259                     |       | 114                         |       |
| Total                                     |       | $                       | 5,506      |                        | $          | 1,988 |   |

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(1)             Receivables from the General Partner reflectthe Partnership’s prepayment of payroll taxes and payroll accruals to theGeneral Partner.

**Note 9.**                      Cash Distributions

The Partnershipintends to consider regular cash distributions to unitholders on a quarterlybasis, although there is no assurance as to the future cash distributions sincethey are dependent upon future cash flows, capital requirements, financialcondition and other factors.  The CreditAgreement prohibits the Partnership from making cash distributions if anypotential default or event of default, as defined in the Credit Agreement,occurs or would result from the cash distribution.

Within 45 daysafter the end of each quarter, the Partnership will distribute all of itsavailable cash (as defined in its partnership agreement) to unitholders ofrecord on the applicable record date. The amount of available cash is all cash on hand at the end of thequarter; plus all cash on hand on the date of determination of available cashfor the quarter resulting from working capital borrowings made after the end ofthe quarter; less the amount of cash reserves established by the GeneralPartner to provide for the proper conduct of the Partnership’s business, tocomply with applicable law, any of the Partnership’s debt instruments, or otheragreements or to provide funds for distributions to unitholders and to theGeneral Partner for any one or more of the next four quarters.  Working capital borrowings are generallyborrowings that are made under the Credit Agreement and in all cases are usedsolely for working capital purposes or to pay distributions to partners.

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The Partnershipwill make distributions of available cash from operating surplus for anyquarter during the subordination period as defined in its partnership agreementin the following manner: firstly, 98.27% to the common unitholders, pro rata,and 1.73% to the General Partner, until the Partnership distributes for eachoutstanding common unit an amount equal to the minimum quarterly distributionfor that quarter; secondly, 98.27% to the common unitholders, pro rata, and1.73% to the General Partner, until the Partnership distributes for eachoutstanding common unit an amount equal to any arrearages in payment of the minimumquarterly distribution on the common units for any prior quarters during thesubordination period; thirdly, 98.27% to the subordinated unitholders, prorata, and 1.73% to the General Partner, until the Partnership distributes foreach subordinated unit an amount equal to the minimum quarterly distributionfor that quarter; and thereafter, cash in excess of the minimum quarterlydistributions is distributed to the unitholders and the General Partner basedon the percentages as provided below.

As the holder ofthe incentive distribution rights, the General Partner is entitled to incentivedistributions if the amount that the Partnership distributes with respect toany quarter exceeds specified target levels shown below:

|                                 | ** ** | **Total Quarterly Distribution** | ** ** | **Marginal Percentage Interest in  Distributions** | ** ** |
|---------------------------------|------------|--------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                      | ** ** | **Target Amount**                     | ** ** | **Unitholders**                                                   | ** ** | **General Partner** | ** ** |
| Minimum  Quarterly Distribution |       | $0.4125                                    |       | 98.27                                                             | %          | 1.73 | % |
| First Target  Distribution      |       | Up  to $0.4625                             |       | 98.27                                                             | %          | 1.73 | % |
| Second Target  Distribution     |       | above  $0.4625 up to $0.5375               |       | 85.27                                                             | %          | 14.73 | % |
| Third Target  Distribution      |       | above  $0.5375 up to $0.6625               |       | 75.27                                                             | %          | 24.73 | % |
| Thereafter                      |       | above $0.6625                              |       | 50.27                                                             | %          | 49.73 | % |

 

The Partnershippaid the following cash distribution during 2007 (in thousands, except per unitdata):

| Cash  Distribution  Payment Date | ** ** | **Per Unit  Cash  Distribution** | ** ** | **Common  Units** | ** ** | **Subordinated  Units** | ** ** | **General  Partner** | ** ** | **General  Partner  Incentive  Distribution(1)** | ** ** | **Total Cash  Distribution** | ** ** |
|---------------------------------------|------------|---------------------------------------|------------|-------------------|------------|-------------------------|------------|----------------------|------------|--------------------------------------------------|------------|-----------------------------------|------------|
| 02/14/07                              |       | $                                     | 0.4550     |              | $          | 2,567                   |       | $                    | 2,567      |                                             | $          | 105                               |       | $ | — |   | $ | 5,239 |   |
| 05/15/07                              |       | 0.4650                                |       | 2,624             |       | 2,624                   |       | 107                  |       | 4                                                |       | 5359                              |       |
|                                       |            |                                       |            |                   |            |                         |            |                      |            |                                                  |            |                                   |            |  |  |  |  |  |  |

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(1)             This distribution of $0.4650 per unit resultedin the Partnership reaching its second target distribution for the firstquarter of 2007.  As a result, theGeneral Partner received an additional distribution of approximately $4.

The Partnership also paid a cash distribution ofapproximately $0.8 million to the purchasers of the Class B units (see Note1).  In addition, on July 24,2007, the board of directors of the General Partner declared a quarterly cashdistribution of $0.4725 per unit for the period from April 1, 2007 through June30, 2007 ($1.89 per unit on an annualized basis) to the Partnership’s commonand subordinated unitholders of record as of the close of business August 3,2007.  This distribution resulted in thePartnership reaching its second target distribution for the second quarterended June 30, 2007.

**Note 10.**               Segment Reporting

The Partnership isa wholesale and commercial distributor of gasoline, distillates and residualoil whose business is organized within two operating segments, Wholesale andCommercial, based on the way the chief operating decision maker (CEO) managesthe business and on the similarity of customers and expected long-termfinancial performance of each segment. The accounting policies of the segments are the same as those describedin Note 2, “Summary of Significant Accounting Policies,” in the Partnership’sAnnual Report on Form 10-K for the year ended December 31, 2006.

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In the Wholesalesegment, the Partnership sells gasoline, home heating oil, diesel, kerosene andresidual oil to unbranded retail gasoline stations and other resellers oftransportation fuels, home heating oil retailers and wholesale distributors.  Generally, customers use their own vehiclesor contract carriers to take delivery of the product at bulk terminals andinland storage facilities that the Partnership owns or controls or with whichit has throughput arrangements.

The Commercialsegment includes (1) sales and deliveries of unbranded gasoline, homeheating oil, diesel, kerosene and 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, and (2) sales of custom blended distillates and residualoil delivered by barges or from a terminal dock.  Commercial segment customers include federaland state agencies, municipalities, large industrial companies, many autonomousauthorities such as transportation authorities and water resource authorities,colleges and universities 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 Partnershipevaluates segment performance based on net product margins before allocationsof corporate and indirect operating costs, depreciation, amortization(including non-cash charges) and interest. Based on the way the CEO manages the business, it is not reasonablypossible for the Partnership to allocate the components of operating costs andexpenses between the reportable segments. Additionally, due to the commingled nature and uses of the Partnership’sassets, it is not reasonably possible for the Partnership to allocate assetsbetween the two segments.  There were nointersegment sales for any of the periods presented below.

Summarizedfinancial information for the Partnership’s reportable segments is presented inthe table below (in thousands):
| ** **                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                  | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Wholesale  Segment:**                     |       |                                            |       |                                          |       |   |   |   |   |
| Sales                                       |       | $                                               | 1,304,171  |                                          | $          | 950,801 |   | $ | 2,744,781 |   | $ | 2,147,780 |   |
| Net product margin (1)                      |       |                                            |       |                                          |       |   |   |   |   |
| Distillates                                 |       | $                                               | 12,555     |                                          | $          | 5,992 |   | $ | 39,296 |   | $ | 25,589 |   |
| Gasoline                                    |       | 2,316                                           |       | 7,166                                         |       | 3,934 |   | 10,402 |   |
| Residual oil                                |       | 5,488                                           |       | 5,266                                         |       | 15,372 |   | 9,920 |   |
| Total                                       |       | $                                               | 20,359     |                                          | $          | 18,424 |   | $ | 58,602 |   | $ | 45,911 |   |
| **Commercial  Segment:**                    |       |                                            |       |                                          |       |   |   |   |   |
| Sales                                       |       | $                                               | 79,919     |                                          | $          | 80,552 |   | $ | 212,485 |   | $ | 234,596 |   |
| Net product margin (1)                      |       | $                                               | 2,634      |                                          | $          | 2,644 |   | $ | 7,234 |   | $ | 7,780 |   |
| **Combined  sales and net product margin:** |       |                                            |       |                                          |       |   |   |   |   |
| Sales                                       |       | $                                               | 1,384,090  |                                          | $          | 1,031,353 |   | $ | 2,957,266 |   | $ | 2,382,376 |   |
| Net product margin (1)                      |       | $                                               | 22,993     |                                          | $          | 21,068 |   | $ | 65,836 |   | $ | 53,691 |   |
| Depreciation allocated to cost of sales     |       | 1,371                                           |       | 424                                           |       | 1,962 |   | 830 |   |
| **Combined gross profit**                   |       | $                                               | 21,622     |                                          | $          | 20,644 |   | $ | 63,874 |   | $ | 52,861 |   |

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(1)             Net product margin is a non-GAAP financialmeasure used by management and external users of the Partnership’s financialstatements to assess the Partnership’s business.  The table above reconciles net product marginon a combined basis to gross profit, a directly comparable GAAP measure.

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A reconciliation of the totals reported for thereportable segments to the applicable line items in the consolidated financialstatements is as follows (in thousands):
| ** **                                                              | ** ** | **Three Months Ended  June 30,  2007** | ** ** | **Six Months Ended  June 30,  2006** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                              | ** ** | **2007**                                              | ** ** | **2006**                                            | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Combined  gross profit**                                              |       | $                                                     | 21,622     |                                                | $          | 20,644 |   | $ | 63,874 |   | $ | 52,861 |   |
| **Operating  costs and expenses not allocated to reportable segments:** |       |                                                  |       |                                                |       |   |   |   |   |
| Selling, general and administrative expenses                            |       | 11,458                                                |       | 9,416                                               |       | 24,864 |   | 20,344 |   |
| Operating expenses                                                      |       | 6,310                                                 |       | 5,266                                               |       | 12,200 |   | 10,817 |   |
| Amortization expenses                                                   |       | 358                                                   |       | 406                                                 |       | 716 |   | 812 |   |
| **Total  operating costs and expenses**                                 |       | 18,126                                                |       | 15,088                                              |       | 37,780 |   | 31,973 |   |
| Operating income                                                        |       | 3,496                                                 |       | 5,556                                               |       | 26,094 |   | 20,888 |   |
| Interest expense                                                        |       | (2,523                                                | )          | (1,786                                              | )          | (5,839 | ) | (4,106 | ) |
| Other income                                                            |       | —                                                |       | —                                              |       | — |   | 356 |   |
| Gain on sale of investment                                              |       | —                                                |       | —                                              |       | 14,118 |   | — |   |
| Income tax expense                                                      |       | (363)                                                 |       | (290)                                               |       | (888) |   | (970 | ) |
| **Net income**                                                          |       | $                                                     | 610        |                                                | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |

 

There were noforeign sales for the three and six months ended June 30, 2007 and 2006.  The Partnership has no foreign assets.

**Note 11.**               Investment in Equity Securities

The Partnershipheld an investment in NYMEX Holdings, Inc. which was accounted for underthe provisions of SFAS No. 115, “Accounting for Certain Investments inDebt and Equity Securities.”  AtDecember 31, 2006, the Partnership recorded the investment at a fair valueof $13.9 million, based on its quoted market price, and classified thesecurity as available for sale in the accompanying consolidated balancesheet.  The Partnership’s unrealized gainof $12.8 million was recorded in other comprehensive income.  Additionally, the Partnership recordedrelated dividend income of $356,000 in the accompanying consolidated statementsof income for the six months ended June 30, 2006.

On March 6, 2007,the Partnership sold its investment in NYMEX Holdings, Inc. along with itsNYMEX seats for approximately $15.3 million and realized a gain ofapproximately $14.1 million in the consolidated statements of income for thesix months ended June 30, 2007.

**Note 12.**               Unitholders’ Equity

***PrivatePlacement***

On March 13, 2007,the Partnership entered into a Class B Unit Purchase Agreement (the “UnitPurchase Agreement”) with Kayne Anderson MLP Investment Company and fundsmanaged by Tortoise Capital Advisors, LLC and Fiduciary Asset Management, LLC(the “Purchasers”) to sell $50.0 million of Class B units representing limitedpartner interests of the Partnership in a private placement (the “PrivatePlacement”).  The Partnership issued andsold 1,785,715 Class B units to the Purchasers pursuant to the Unit PurchaseAgreement on May 9, 2007.  The Class Bunits were convertible into common units on a one-for-one basis.

15

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In connection with the issuance of the Class B units, thePartnership agreed to a discount in the purchase price of approximately $0.8million, which is the approximate amount of the product of (i) the 1,785,715 Class B units,and (ii) $0.4650,the amount of the Partnership’s first quarter per unit distribution that waspaid to the common and subordinated unitholders on May** **15,2007.  Such discount was paid by thePartnership to the Purchasers of the Class B units substantiallycontemporaneously with the payment of the Partnership’s first quarterdistribution.  After giving effectto such reduction, the purchase price for the Class B units was approximately$49.2 million, or $27.53 per unit.  The netpurchase price of the Class B units, after the reduction and related fees,was $49.1 million.  The net proceeds ofthe Class B units were used to partially finance the acquisition of threerefined petroleum products terminals in Albany and Newburgh, New York andBurlington, Vermont from ExxonMobil (see Note 13).  On May 22, 2007, the Class B units convertedinto common units on one-for-one basis.

In connection withthe Unit Purchase Agreement, the Partnership entered into a registration rightsagreement (the “Registration Rights Agreement”) dated May 9, 2007 with thePurchasers.  Pursuant to the RegistrationRights Agreement, the Partnership is required to file a shelf registrationstatement to register the common units issuable upon conversion of the Class Bunits issued to the Purchasers within 90 days, and use its commerciallyreasonable efforts to cause the registration statement to become effectivewithin 180 days of the closing of the Private Placement.  On August** **6, 2007,the Partnership filed a Registration Statement on Form S-3 with the SEC for theregistration of the 1,785,715 common units into which the Class B unitsconverted.  In addition, the RegistrationRights Agreement gives the Purchasers piggyback registration rights undercertain circumstances.  These registration rights are transferable toaffiliates of the Purchasers and, in certain circumstances, to third parties.

If the shelfregistration statement is not effective by November 5, 2007, then thePartnership could potentially pay the Purchasers liquidated damages of $125,000per 30-day period for the first 60 days following November 5, 2007.  This amount could increase by an additional$125,000 per 30-day period for each subsequent 60 days, up to a maximum of$500,000 per 30-day period.  Theaggregate amount of liquidated damages the Partnership could pay will notexceed 10% of the gross purchase price, or $5.0 million.  Based upon its evaluation of the liabilityexposure related to the liquidated damages, the Partnership determined suchexposure is remote and, therefore, did not record a liability as of June 30,2007.

***ClassB Units Convert into Common Units***

On May 9, 2007,the Partnership issued and sold to the Purchasers 1,785,715 Class B unitsrepresenting limited partner interests of the Partnership in a privateplacement for $50.0 million.  Aftergiving effect to a price reduction as discussed above, the purchase price forthe Class B units was approximately $49.2 million, or $27.53 perunit.  On May 22, 2007, the Class Bunits converted into common units on one-for-one basis.

In connection withthe transaction, the Partnership was required to take into account the effectof EITF 98-05.  As a result, anon-cash reduction in net income available to limited partners wasrecorded.  This non-cash reduction isrequired to be recorded pursuant to EITF 98-05 because the fairvalue of the Partnership’s common units on May** **9,2007 (the date on which the Class B units were issued) was greater thanthe purchase price of the Class B units, which was established at the time of theexecution of the Unit Purchase Agreement on March 14, 2007.  The non-cash reduction was approximately $16.4 million computed as theproduct of (i) the1,785,715 Class B units, and (ii) the difference between the fair value of a common unit on thedate of issuance ($36.71) and the conversion rate after the price reduction($27.53).  The non-cash reductionresulted in the Partnership recognizing a $16.4 million decrease in commonunit equity and a corresponding increase in Class B unit equity.  Additionally, the Partnership recordedaccretion of $16.4 millionas a non-cash distribution to common unitholders.

AlthoughEITF 98-05 affects net income available to limited partners, it doesnot affect net income, nor does it affect total unitholders’ equity.

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**Note 13.**               Terminal Acquisition

On May 9, 2007, the Partnership completed its acquisitionof three refined petroleum products terminals located in Albany and Newburgh,New York and Burlington, Vermont from ExxonMobil for cash consideration ofapproximately $101.5 million plus $1.1 million in acquisition costs, for an aggregate purchaseprice of $102.6 million.  The Partnership financed the acquisitionthrough an expansion of its credit facility, proceeds from the sale of itsNYMEX Holdings shares and related NYMEX seats and the private placement ofClass B units (see Notes 6, 11 and 12, respectively).  This acquisition has been accounted for as anasset acquisition.

Thefollowing table presents the preliminary allocation of the purchase price tothe estimated fair value of the assets acquired and environmental liabilitiesassumed.  The allocation of the purchaseprice will be finalized as the Partnership receives other information relevantto the acquisition, including a valuation of the assets purchased and furtherinformation with respect to the environmental liabilities assumed.  The final allocation for this acquisition maybe different from the preliminary estimates presented below.  The impact of any adjustments to the finalallocation is not expected to be material to the Partnership’s results for theyear ended December 31, 2007 (in thousands):

| Assets purchased:                                       |   |    |    |
|---------------------------------------------------------|--------|---------|---------|
| Buildings,  docks, terminal facilities and improvements |   | $       | 88,771  |   |
| Land                                                    |   | 21,434  |    |
| Fixtures,  equipment and automobiles                    |   | 415     |    |
| Total assets  purchased                                 |   | 110,620 |    |
|                                                    |   |    |    |
| Less environmental  liabilities assumed (see Note 14)   |   | (8,000  | )       |
|                                                    |   |    |    |
| Total purchase price                                    |   | $       | 102,620 |   |

 

**Note 14.**               Environmental Liabilities

ThePartnership currently owns or leases properties where refined petroleumproducts are being or have been handled. These properties and the refined petroleum products handled thereon maybe subject to federal and state environmental laws and regulations.  Under such laws and regulations, thePartnership could be required to remove or remediate containerized hazardousliquids or associated generated wastes (including wastes disposed of orabandoned by prior owners or operators), to clean up contaminated propertyarising from the release of liquids or wastes to the environment, includingcontaminated groundwater, or to implement best management practices to preventfuture contamination.

ThePartnership maintains insurance of various types with varying levels ofcoverage that it considers adequate under the circumstances to cover itsoperations and properties.  The insurancepolicies are subject to deductibles that the Partnership considers reasonableand not excessive.  In addition, thePartnership has entered into indemnification agreements with various sellers inconjunction with several of its acquisitions. Allocation of environmental liability is an issue negotiated inconnection with each of the Partnership’s acquisition transactions.  In each case, the Partnership makes anassessment of potential environmental liability exposure based on availableinformation.  Based on that assessmentand relevant economic and risk factors, the Partnership determines whether to,and the extent to which it will, assume liability for existing environmentalconditions.

In connection withthe purchase of ExxonMobil’s Albany and Newburgh, New York and Burlington,Vermont terminals in May, 2007, the Partnership identified certainenvironmental liabilities which it assumed, including the remediationobligations under a proposed remedial action plan submitted by ExxonMobil tothe New York Department of Environmental Conservation (“NYDEC”) with respect tothe Albany, New York terminal.  As aresult, the Partnership recorded, on an undiscounted basis, total environmentalliabilities of $8.0 million of which $0.5 million was recorded as acurrent liability and $7.5 million was recorded as a long-term liability on theaccompanying consolidated balance sheet at June 30, 2007.

17

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In connection withthe 2006 acquisition of its Macungie, Pennsylvania terminal (the “GlobalMacungie Terminal”), the Partnership assumed certain existing environmentalliabilities at the terminal.  ThePartnership did not accrue for these contingencies as it currently believesthat the aggregate amount of these liabilities cannot be reasonably estimatedat this time.  The Partnership alsoexecuted an Administrative Order on Consent (“AOC”) with the U.S. EnvironmentalProtection Agency, Region III (“EPA”) requiring certain investigatoryactivities at the Global Macungie Terminal. Although the Partnership cannot predict the outcome of the investigationof the Global Macungie Terminal, based upon current information, thePartnership does not anticipate that the outcome will have a material adverseeffect on it.  Furthermore, the Partnershipdoes not believe that compliance with the terms of the AOC executed by it willresult in material costs or have a material impact on the Partnership’soperations.

ThePartnership’s estimates used in these reserves are based on all known facts atthe time and its assessment of the ultimate remedial action outcomes.  Among the many uncertainties that impact thePartnership’s estimates are the necessary regulatory approvals for, andpotential modification of, its remediation plans, the amount of data availableupon initial assessment of the impact of soil or water contamination, changesin costs associated with environmental remediation services and equipment andthe possibility of existing legal claims giving rise to additional claims.  Therefore, although the Partnership believesthat the reserve is adequate, no assurances can be made that any costs incurredin excess of this reserve or outside of indemnifications or not otherwisecovered by insurance would not have a material adverse effect on the Partnership’sfinancial condition, results of operations or cash flows.

**Note 15.**               Property and Equipment

Property andequipment consisted of the following (in thousands):

|                                                         | ** ** | **June 30,  2007** | ** ** | **December 31,  2006** | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|-----------------------------|------------|
|                                                    |       |                    |       |                        |       |
| Buildings, docks, terminal  facilities and improvements |       | $                       | 117,777    |                        | $          | 27,598 |   |
| Land                                                    |       | 26,852                  |       | 5,418                       |       |
| Fixtures, equipment and  automobiles                    |       | 5,525                   |       | 3,508                       |       |
|                                                    |       | 150,154                 |       | 36,524                      |       |
| Less accumulated  depreciation                          |       | (7,269                  | )          | (4,867                      | )          |
| Total                                                   |       | $                       | 142,885    |                        | $          | 31,657 |   |

 

The increase ofapproximately $113.6 million in property and equipment and $2.4 million inaccumulated depreciation is primarily due to the Partnership’s acquisition ofthree refined petroleum products terminals from ExxonMobil (see Note 13).

**Note 16.**               Income Taxes

Global MontelloGroup Corp. is a taxable entity for federal and state income tax purposes.  Current and deferred income taxes arerecognized on the separate earnings of Global Montello Group Corp. for thethree and six months ended June 30, 2007 and 2006.  The after-tax earnings of Global MontelloGroup Corp. are included in the earnings of the Partnership.  Deferred income taxes reflect the net taxeffects of temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for incometax purposes for Global Montello Group Corp.

18

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On January 1,2007, the Partnership adopted the provisions of FASB Interpretation No. 48, “Accountingfor Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109”(“FIN 48”).  FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in an enterprise’sfinancial statements in accordance with SFAS No. 109, “Accounting forIncome Taxes.”  It also prescribes arecognition threshold and measurement attribute for the financial statementrecognition and measurement of a tax position taken or expected to be taken ina tax return, and it provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure andtransition.

The Partnershipperformed an evaluation for the tax years ended December 31, 2006 and 2005, thetax years that remain subject to examination by major tax jurisdictions as ofJune 30, 2007.  Based on such evaluation,the Partnership concluded that there were no significant uncertain taxpositions requiring recognition in its financial statements as of June 30,2007.  As such, the adoption of FIN 48did not impact the Partnership’s consolidated financial condition, results ofoperations or cash flows.

**Note 17.**               Recent Accounting Pronouncements

In February 2007,the Financial Accounting Standards Board (“FASB”) issuedSFAS No. 159, “The Fair Value Option for Financial Assets andFinancial Liabilities” (“SFAS No. 159”) which provides entities with anoption to measure many financial instruments and certain other items at fairvalue that are not currently measured at fair value.  The election to use the fair value option isavailable when an entity first recognizes a financial asset or financial liabilityor upon entering into a firm commitment. Subsequent changes in fair value must be recorded in earnings.  This statement also establishes presentationand disclosure requirements designed to facilitate comparisons between entitiesthat choose different measurement attributes for similar types of assets andliabilities.  SFAS No. 159 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007.  The Partnershipwill adopt this statement on January 1, 2008 and is in the process ofevaluating the impact of SFAS No. 159 on its consolidated financial statements.

In September 2006,the FASB issued SFAS No. 157, “FairValue Measurements” (“SFAS No. 157”). This statement defines fair value, establishes guidelines for measuringfair value and requires additional disclosures regarding fair valuemeasurements.  SFAS No. 157 applies onlyto fair value measurements currently required or permitted by other accountingstandards and is expected to increase the consistency of those measurements.  SFAS No. 157 is effective forfiscal years beginning after November 15, 2007. The Partnership will adopt this statement on January 1, 2008 and is inthe process of evaluating the impact of SFAS No. 157 on its consolidatedfinancial statements.

**Note 18.**               Subsequent Events

The GeneralPartner’s board of directors declared a quarterly cash distribution of $0.4725per unit ($1.89 per unit on an annualized basis) for the period from April 1,2007 through June 30, 2007.  On August14, 2007, the Partnership will pay this cash distribution to its common andsubordinated unitholders of record as of the close of business August 3, 2007.

On July 9, 2007, the Partnership announced that it enteredinto a Terminals and Sale Purchase Agreement to acquire two refined petroleumproducts terminals located in Glenwood Landing and Inwood, New York fromExxonMobil for cash consideration of approximately $34.7 million.

On August 6, 2007,pursuant to the Registration Rights Agreement described in Note 12, thePartnership filed a Registration Statement on Form S-3 with the SEC for theregistration of 1,785,715 common units. This Registration Statement is intended to satisfy the Partnership’sobligation to register the common units into which Class B units issued to thePurchasers in the Private Placement described in Note 12 converted on May 22,2007.

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**Item 2.        Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

Thefollowing discussion and analysis of financial condition and results ofoperations of Global Partners LP should be read in conjunction with thehistorical consolidated financial statements of Global Partners LP and thenotes thereto included elsewhere in this Quarterly Report on Form 10-Q.

**Forward-LookingStatements**

This QuarterlyReport on Form 10-Q contains certain forward-looking statements within themeaning of the federal securities laws. These forward-looking statements are identified as any statements thatdo not relate strictly to historical or current facts and can generally beidentified by the use of forward-looking terminology including “may,” “believe,”“expect,” “anticipate,” “estimate,” “continue” or other similar words.  Such statements may discuss futureexpectations for, or contain projections of, results of operations, financialcondition or our ability to make distributions to unitholders or state otherforward-looking information. Forward-looking statements are not guarantees of performance.  Although we believe these forward-lookingstatements are based on reasonable assumptions, statements made regardingfuture results are subject to a number of assumptions, uncertainties and risks,many of which are beyond our control, which may cause future results to bematerially different from the results stated or implied in this document.  These risks and uncertainties include, amongother things:

·              We may not havesufficient cash from operations to enable us to pay the minimum quarterlydistribution following establishment of cash reserves and payment of fees andexpenses, including payments to our general partner.

·              Warmer weatherconditions could adversely affect our results of operations and cash availablefor distribution to our unitholders.

·              Our risk managementpolicies cannot eliminate all commodity risk. In addition, any noncompliance with our risk management policies couldresult in significant financial losses.

·              We are exposed totrade credit risk in the ordinary course of our business activities.

·              Due to our lack ofasset and geographic diversification, adverse developments in the terminalsthat we use or in our operating areas could reduce our ability to makedistributions to our unitholders.

·              We are exposed toperformance risk in our supply chain.

·              Our general partnerand its affiliates have conflicts of interest and limited fiduciary duties,which may permit them to favor their own interests to the detriment ofunitholders.

·              Unitholders havelimited voting rights and are not entitled to elect our general partner or itsdirectors or initially to remove our general partner without its consent, whichcould lower the trading price of our common units.

·              Unitholders may berequired to pay taxes on their share of our income even if they do not receiveany cash distributions from us.

Additionalinformation about risks and uncertainties that could cause actual results todiffer materially from forward-looking statements is contained in Part I, Item1A, “Risk Factors,” in our Annual Report on Form 10-K for the year endedDecember 31, 2006 and in Part II, Item 1A, “Risk Factors,” in this QuarterlyReport on Form 10-Q.

Allforward-looking statements included in this Form 10-Q and all subsequentwritten or oral forward-looking statements attributable to us or persons actingon our behalf are expressly qualified in their entirety by these cautionarystatements.  The forward-lookingstatements speak only as of the date made, other than as required by law, andwe undertake no obligation to publicly update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.

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**Reconciliation of Net (Loss)Income Available to Limited Partners**

Inconnection with the private placement of Class B units (see Note 12 of Notes toFinancial Statements), we were required to take into account the effect ofEITF 98-05.  As a result, anon-cash reduction in net income available to limited partners wasrecorded.  This non-cash reduction isrequired to be recorded pursuant to EITF 98-05 because the fairvalue of our common units on May** **9, 2007(the date on which the Class B units were issued) was greater than thepurchase price of the Class B units, which was established at the time of theexecution of the Unit Purchase Agreement on March 14, 2007.  Although EITF 98-05 affects netincome available to limited partners, it does not affect net income ordistributable cash flow to limited partners, nor does it affect totalunitholders’ equity.

The following setsforth the reconciliation of net (loss) income available to limited partners forthe periods presented (in thousands, except per unit data):

** **
| ** **                                                                                       | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                                                       | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                                                       | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                                                                             |       |                             |       |                           |       |   |   |   |   |
| Net income                                                                                       |       | $                                | 610        |                           | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Less: General Partner’s general partner interest                                            |       | (11                              | )          | (70                            | )          | (668 | ) | (324 | ) |
| Net income  available to limited partners before the effect of EITF 98-05                   |       | 599                              |       | 3,410                          |       | 32,817 |   | 15,844 |   |
| Less: Non-cash reduction under EITF 98-05  allocated to limited partners                    |       | (16,400                          | )          | —                         |       | (16,400 | ) | — |   |
| Net (loss)  income available to limited partners                                                 |       | (15,801                          | )          | 3,410                          |       | 16,417 |   | 15,844 |   |
| Less: Dilutive impact of theoretical distribution of  earnings                                   |       | —                           |       | —                         |       | (12,405 | ) | (2,872 | ) |
| Net (loss)  income available to limited partners under EITF 03-06 and  EITF 98-05      |       | $                                | (15,801    | )                              | $          | 3,410 |   | $ | 4,012 |   | $ | 12,092 |   |
|                                                                                             |       |                             |       |                           |       |   |   |   |   |
| Per unit data:                                                                                   |       |                             |       |                           |       |   |   |   |   |
| Net (loss)  income per diluted limited partner unit under EITF 03-06 and  EITF 98-05   |       | $                                | (1.28      | )                              | $          | 0.30 |   | 0.47 |   | $ | 1.15 |   |
| Dilutive impact  of non-cash reduction under EITF 98-05 allocated to limited  partner units |       | 1.33                             |       | —                         |       | 1.33 |   | — |   |
| Dilutive impact  of theoretical distribution of earnings                                         |       | —                           |       | —                         |       | 1.10 |   | 0.25 |   |
| Adjusted net income per  diluted limited partner unit(1)                                         |       | $                                | 0.05       |                           | $          | 0.30 |   | 2.90 |   | 1.40 |   |

 

Asnoted above, the effect of EITF 98-05 does not affect distributable cashflow.  The following is a reconciliationof net income to distributable cash flow for the periods presented (inthousands):
| ** **                                                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                   | ** ** | **June 30,**                | ** ** | **June 30,**              | ** ** |
| ** **                                                   | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Reconciliation  of net income to distributable cash flow(2): |       |                             |       |                           |       |   |   |   |   |
| Net income                                                   |       | $                                | 610        |                           | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Depreciation and amortization                                |       | 2,067                            |       | 1,088                          |       | 3,336 |   | 2,160 |   |
| Gain on sale of investment                                   |       | —                           |       | —                         |       | (14,118 | ) | — |   |
| Maintenance capital expenditures                             |       | (1,100                           | )          | (411                           | )          | (1,867 | ) | (515 | ) |
| Distributable cash flow                                      |       | $                                | 1,577      |                           | $          | 4,157 |   | $ | 20,836 |   | $ | 17,813 |   |

 

(1)            Adjustednet income per diluted limited partner unit is a non-GAAP financial measureused to measure our financial performance on a per-unit basis and is discussedbelow under “Evaluating Our Operating Results.”

(2)            Distributablecash flow is a non-GAAP financial measure used for our limited partners sinceit serves as an indicator of our success in providing a cash return on theirinvestment and is discussed below under “Evaluating Our Operating Results.”

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**Overview**

***General***

Weown, control or have access to one of the largest terminal networks of refinedpetroleum products in the Northeast.  Weare one of the largest wholesale distributors of gasoline, distillates (such ashome heating oil, diesel and kerosene) and residual oil to wholesalers,retailers and commercial customers in the Northeast.  For the three and six months ended June 30,2007, we sold approximately $1.4 billion and $3.0 billion, respectively, ofrefined petroleum products and small amounts of natural gas.

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.

***Products and Operational Structure***

Ourproducts include gasoline, distillates and residual oil.  We sell gasoline to unbranded retail gasolinestations and resellers.  The distillateswe sell are used primarily for fuel for trucks and off-road constructionequipment and for space heating of residential and commercial buildings.  We sell residual oil to major housing units,such as public housing authorities, colleges and hospitals and large industrialfacilities that use processed steam in their manufacturing processes.  In addition, we sell bunker fuel, which wecan custom blend, to cruise ships, bulk carriers and fishing fleets.

Ourbusiness is divided into two segments:

•                *Wholesale.*  Thissegment includes sales of gasoline, distillates and residual oil to unbrandedretail gasoline stations and other resellers of transportation fuels, homeheating oil retailers and wholesale distributors.

•                *Commercial.*  Thissegment includes sales and deliveries of unbranded gasoline, distillates,residual oil and small amounts of natural gas to customers in the public sectorand to large commercial and industrial customers, either through a competitivebidding process or through contracts of various terms.  This segment also purchases, custom blends,sells and delivers bunker fuel and diesel to cruise ships, bulk carriers andfishing fleets generally by 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.  Our results of operations are less weathersensitive than they have been in the past. The increase in the non-weather sensitive components including, withoutlimitation, transportation fuels of our business helps to partially offset theeconomic impact that warmer weather conditions may have on our home heating oiland residual oil sales.  In addition,substantial portions of our heating oil are sold on a forward fixed basis.  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 results of operations and financialcondition depend, in part, upon the following:

·              *We commit substantial resourcesto pursuing acquisitions, though there is no certainty that we willsuccessfully complete any acquisitions or receive the economic results weanticipate from completed acquisitions.*  Consistent with our businessstrategy, we are continuously engaged in discussions with potential sellers ofterminalling, storage and/or marketing assets and related businesses.  In an effort to prudently and economicallyleverage our asset base, knowledge base and skill sets, management has alsoexpanded its efforts to pursue businesses that are closely related to orsignificantly intertwined with our existing lines of business.  Our growth may depend on our ability to makeaccretive acquisitions.  We may be unableto make such accretive acquisitions for a number of reasons, including, but notlimited to, the following:  (1) we areunable to identify attractive acquisition candidates or negotiate acceptablepurchase contracts with them; (2) we are unable to raise financing for suchacquisitions on economically acceptable terms; or (3) we are outbid bycompetitors.  In addition, we mayconsummate acquisitions that at the time of consummation we believe will beaccretive, but that ultimately may not be accretive.  If any of these events were to occur, ourfuture growth would be limited.  We cangive no assurance that our current or future acquisition efforts will besuccessful or that any such acquisition will be completed on terms that arefavorable to us.

·              *Our financial results aregenerally better in the first and fourth quarters of the calendar year. *Demand for some refined petroleum products, specifically home heatingoil and residual oil for space heating purposes, is generally higher duringNovember through March than during April through October.  We obtain a significant portion of our salesduring these winter months.  Therefore, ourresults of operations for the first and fourth calendar quarters are generallybetter than for the second and third quarters. With lower cash flow during the second and third calendar quarters, wemay be required to borrow money in order to pay the minimum quarterlydistribution to our unitholders.

·              *Warmer weather conditions couldadversely affect our results of operations and financial condition. *Weather conditions generally have an impact on the demand for both homeheating oil and residual oil.  Because wesupply distributors whose customers depend on home heating oil and residual oilfor space heating purposes during the winter, 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.

·              *Energy efficiency, newtechnology and alternative fuels, natural gas in particular, could reducedemand for our products.*  Increased conservation and technologicaladvances have adversely affected the demand for home heating oil and residualoil.  Consumption of residual oil hassteadily declined over the last three decades. We could face additional competition from alternative energy sources asa result of future government-mandated controls or regulation further promotingthe use of cleaner fuels.  Due in part tosupport for conversion to natural gas on environmental grounds, some industrialresidual oil users have switched to natural gas.  Those end users who are dual-fuel users havethe ability to switch between residual oil and natural gas.  During a period of increasing residual oilprices relative to the prices of natural gas, dual-fuel customers may switch tonatural gas or, over the long-term, may convert to natural gas.  Such switching or conversion could have anadverse effect on our results of operations and financial condition.

·              *New, stricter environmental lawsand regulations could significantly increase our costs, which could adverselyaffect our results of operations and financial condition.*  Ouroperations are subject to federal, state and local laws and regulationsregulating product quality specifications and other environmental matters.  The trend in environmental regulation istowards more restrictions and limitations on activities that may affect theenvironment.  Our business may beadversely affected by increased costs and liabilities resulting from suchstricter laws and regulations.  We try toanticipate future regulatory requirements that might be imposed and planaccordingly to remain in compliance with changing environmental laws andregulations and to minimize the costs of such compliance.  However, there can be no assurances as to thetiming and type of such changes in existing laws or the promulgation of newlaws or the amount of any required expenditures associated therewith.

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**Resultsof Operations**

***Evaluating Our 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”),Adjusted EBITDA and net income as adjusted for one-time gains 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 unbranded gasoline, distillates, residual oil and natural gas.  Product costs include the cost of acquiringthe refined petroleum products that we sell and all associated costs includingshipping and handling costs to bring such products to the point of sale.  Net product margin is a non-GAAP financialmeasure used by management and external users of the Partnership’s financialstatements to assess the Partnership’s business.

*GrossProfit*

Wedefine gross profit as our sales minus product costs and terminal depreciationexpense allocated to cost of sales. Sales include sales of unbranded gasoline, distillates, residual oil andnatural gas.  Product costs include thecost of acquiring the refined petroleum products that we sell and allassociated costs to bring such products to the point of sale.

*Selling, General and Administrative Expenses*

OurSG&A expenses include marketing costs, corporate overhead, employee salariesand 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.

*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.

*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.

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*AdjustedNet Income Per Diluted Limited Partner Unit*

We use adjustednet 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 general partner’sinterest as provided under EITF 03-06 and a non-cash reduction innet income available to limited partners under EITF 98-05, dividedby the weighted average number of outstanding diluted common and subordinatedunits, or limited partner units, during the period.

Net income perdiluted limited partner unit as dictated by EITF 03-06 is theoretical and proforma in nature and does not reflect the economic probabilities of whetherearnings for an accounting period would or could be distributed tounitholders.  The partnership agreementdoes not provide for the quarterly distribution of net income; rather, itprovides for the distribution of available cash, which is a contractuallydefined term that generally means all cash on hand at the end of each quarterafter establishment of sufficient cash reserves required to operate ourbusiness.  Accordingly, the distributionswe historically paid and will pay in future periods are not impacted by netincome per diluted limited partner unit as dictated by EITF 03-06.

The non-cash reduction under EITF 98-05 is theresult of accounting for the sale of Class B units (see Note 12 of Notes toFinancial Statements).  AlthoughEITF 98-05 affects net income available to limited partners, it does notaffect net income or distributable cash flow to limited partners, nor does itaffect total unitholders equity.

Adjusted netincome per diluted limited partner unit is a non-GAAP financial measure andshould not be considered as an alternative to net income per diluted limitedpartner unit or any other measure of financial performance presented inaccordance with GAAP.  In addition, ouradjusted net income per diluted limited partner unit may not be comparable tothe adjusted net incomer per diluted limited partner unit or similarly titledmeasure of other companies.

*EBITDA, Adjusted EBITDA and Net Income as Adjusted forOne-time Gains*

EBITDA,adjusted EBITDA and net income as adjusted for one-time gains are used assupplemental financial measures by management and external users of ourfinancial statements, such as investors, commercial banks and researchanalysts, to assess:

·              ourcompliance with certain financial covenants included in our debt agreements;

·              ourfinancial performance without regard to financing methods, capital structure,income taxes or historical cost basis;

·              our abilityto generate cash sufficient to pay interest on our indebtedness and to makedistributions to our partners;

·              ouroperating performance and return on invested capital as compared to those ofother companies in the wholesale marketing and distribution of refinedpetroleum products business, without regard to financing methods and capitalstructure; and

·              theviability of acquisitions and capital expenditure projects and the overallrates of return of alternative investment opportunities.

Adjusted EBITDA and net income asadjusted for one-time gains reflect the exclusion of the $14.1 million gain oninvestment for the six months ended June 30, 2007.  EBITDA, adjusted EBITDA and net income asadjusted for one-time gains should not be considered an alternative to netincome, operating income, cash flow from operating activities or any othermeasure of financial performance or liquidity presented in accordance withGAAP.  EBITDA, adjusted EBITDA and net incomeas adjusted for one-time gains exclude some, but not all, items that affect netincome, and these measures may vary among other companies.  Therefore, EBITDA, adjusted EBITDA and netincome as adjusted for one-time gains may not be comparable to similarly titledmeasures of other companies.

*Distributable Cash Flow*

Distributable cash flow also is animportant non-GAAP financial measure for our limited partners since it servesas an indicator of our success in providing a cash return on theirinvestment.  Specifically, this financialmeasure indicates to investors whether or not we are generating cash flow at alevel 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 a non-GAAP financial measure and should not beconsidered as an alternative to net income, cash flow from operations, or anyother measure of financial performance presented in accordance with GAAP.  In addition, our distributable cash flow maynot be comparable to distributable cash flow or similarly titled measures ofother companies.

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***Three and Six Months Ended June 30, 2007 and2006***

***Duringthe second quarter ended June 30, 2007, we experienced higher sales volumesprimarily due to our terminal acquisitions and cooler-than-normaltemperatures.   Additionally, webenefited from margin expansion, volume expansion related to our terminalacquisitions and volume expansion due to weather that enabled us to achieve ahigher net product margin in our wholesale distillate business and favorablemarket conditions that enabled us to achieve a higher net product margin in ourresidual oil business as compared to the same period in 2006.  Commodity prices continued to rise for thethree and six months ended June 30, 2007. Temperatures were 4% colder and 2% colder than normal for the three andsix months ended June 30, 2007, respectively, and 7% colder and 10% colder thanlast year for the three and six months ended June 30, 2007, respectively, asmeasured by aggregate heating degree days.***

26

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***Key Performance Indicators***

Thefollowing table provides a summary of some of the key performance indicatorsthat may be used to assess our results of operations.  These comparisons are not necessarilyindicative of future results (dollars in thousands, except per unit amounts):
| ** **                                                | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income as adjusted  for one-time gains (1)            |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 19,367 |   | $ | 16,168 |   |
|                                                      |       |                                            |       |                                          |       |   |   |   |   |
| Adjusted net income per  diluted limited partner unit (2) |       | $                                               | 0.05       |                                          | $          | 0.30 |   | $ | 2.90 |   | $ | 1.40 |   |
|                                                      |       |                                            |       |                                          |       |   |   |   |   |
| Adjusted EBITDA (3)                                       |       | $                                               | 5,563      |                                          | $          | 6,644 |   | $ | 29,430 |   | $ | 23,404 |   |
|                                                      |       |                                            |       |                                          |       |   |   |   |   |
| Distributable cash flow  (4)                              |       | $                                               | 1,577      |                                          | $          | 4,157 |   | $ | 20,836 |   | $ | 17,813 |   |
|                                                      |       |                                            |       |                                          |       |   |   |   |   |
| **Wholesale Segment:**                                    | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Volume (gallons)                                          |       | 630,155                                         |       | 462,087                                       |       | 1,440,977 |   | 1,150,571 |   |
| Sales                                                     |       | $                                               | 1,304,171  |                                          | $          | 950,801 |   | $ | 2,744,781 |   | $ | 2,147,780 |   |
| Net product  margin (5)                                   |       |                                            |       |                                          |       |   |   |   |   |
| Distillates                                               |       | $                                               | 12,555     |                                          | $          | 5,992 |   | $ | 39,296 |   | $ | 25,589 |   |
| Gasoline                                                  |       | 2,316                                           |       | 7,166                                         |       | 3,934 |   | 10,402 |   |
| Residual oil                                              |       | 5,488                                           |       | 5,266                                         |       | 15,372 |   | 9,920 |   |
| Total                                                     |       | $                                               | 20,359     |                                          | $          | 18,424 |   | $ | 58,602 |   | $ | 45,911 |   |
| **Commercial Segment:**                                   | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Volume (gallons)                                          |       | 53,223                                          |       | 56,827                                        |       | 148,773 |   | 166,307 |   |
| Sales                                                     |       | $                                               | 79,919     |                                          | $          | 80,552 |   | $ | 212,485 |   | $ | 234,596 |   |
| Net product  margin (5)                                   |       | $                                               | 2,634      |                                          | $          | 2,644 |   | $ | 7,234 |   | $ | 7,780 |   |
| **Combined sales and net product  margin:**               | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Sales                                                     |       | $                                               | 1,384,090  |                                          | $          | 1,031,353 |   | $ | 2,957,266 |   | $ | 2,382,376 |   |
| Net product  margin (5)                                   |       | $                                               | 22,993     |                                          | $          | 21,068 |   | $ | 65,836 |   | $ | 53,691 |   |
| Depreciation  allocated to cost of sales                  |       | 1,371                                           |       | 424                                           |       | 1,962 |   | 830 |   |
| **Combined gross profit**                                 |       | $                                               | 21,622     |                                          | $          | 20,644 |   | $ | 63,874 |   | $ | 52,861 |   |
|                                                      |       |                                            |       |                                          |       |   |   |   |   |
| **Weather conditions:**                                   | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Normal heating degree  days                               |       | 784                                             |       | 784                                           |       | 3,654 |   | 3,654 |   |
| Actual heating degree  days                               |       | 817                                             |       | 762                                           |       | 3,735 |   | 3,397 |   |
| Variance from normal  heating degree days                 |       | 4                                               | %          | (3                                            | )%         | 2 | % | (7 | )% |
| Variance from prior period actual heating degree days     |       | 7                                               | %          | (16                                           | )%         | 10 | % | (14 | )% |

----

(1)            Netincome as adjusted for one-time gains is a non-GAAP financial measure which isdiscussed above under “Evaluating Our Operating Results.”  The table below presents a reconciliation ofnet income as adjusted for one-time gains to the most directly comparable GAAPfinancial measure.

(2)            Adjustednet income per diluted limited partner unit is a non-GAAP financial measurewhich is discussed above under “Evaluating Our Operating Results.”  The table below presents a reconciliation ofadjusted net income per diluted limited partner unit to the most directlycomparable GAAP financial measure.

(3)            AdjustedEBITDA is a non-GAAP financial measure which is discussed above under “EvaluatingOur Operating Results.”  The table belowpresents reconciliations of Adjusted EBITDA to the most directly comparableGAAP financial measures.

(4)            Distributablecash flow is a non-GAAP financial measure which is discussed above under “EvaluatingOur Operating Results.”  The table belowpresents reconciliations of distributable cash flow to the most directlycomparable GAAP financial measures.

(5)            Netproduct margin is a non-GAAP financial measure which is discussed above under “EvaluatingOur Operating Results.”  The table abovereconciles net product margin on a combined basis to gross profit, a directlycomparable GAAP financial measure.

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The following table presents a reconciliation of netincome as adjusted for one-time gains to the most directly comparable GAAPfinancial measure on a historical basis for each period presented:
| ** **                                                                      | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|---------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                      | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Reconciliation  of net income to net income as adjusted for one-time gains:** |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                      |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Gain on sale of investment                                                      |       | —                                          |       | —                                        |       | (14,118 | ) | — |   |
| Net income as  adjusted for one-time gains                                      |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 19,367 |   | $ | 16,168 |   |

 

The following table presents a reconciliation ofadjusted net income per diluted limited partner unit to the most directlycomparable GAAP financial measure on a historical basis for each periodpresented:
| ** **                                                                                                                   | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                                   | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Reconciliation  of net income per diluted limited partner unit to adjusted net income per  diluted limited partner unit:** | ** ** | ** **                                      | ** ** | ** **                                    | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net income per diluted limited partner unit under  EITF 03-06 and EITF 98-05                                                 |       | $                                               | (1.28      | )                                             | $          | 0.30 |   | $ | 0.47 |   | $ | 1.15 |   |
| Dilutive impact of non-cash reduction under EITF  98-05                                                                      |       | 1.33                                            |       | —                                        |       | 1.33 |   | — |   |
| Dilutive impact of theoretical distribution of  earnings                                                                     |       | —                                          |       | —                                        |       | 1.10 |   | 0.25 |   |
| Adjusted net  income per diluted limited partner unit                                                                        |       | $                                               | 0.05       |                                          | $          | 0.30 |   | $ | 2.90 |   | $ | 1.40 |   |

 

The followingtable presents reconciliations of EBITDA and Adjusted EBITDA to the mostdirectly comparable GAAP financial measures on a historical basis for eachperiod presented (in thousands):
| ** **                                                                                                  | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                                  | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Reconciliation  of net income to EBITDA and Adjusted EBITDA:**                                            |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                                                  |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Depreciation and amortization                                                                               |       | 2,067                                           |       | 1,088                                         |       | 3,336 |   | 2,160 |   |
| Interest expense                                                                                            |       | 2,523                                           |       | 1,786                                         |       | 5,839 |   | 4,106 |   |
| Income tax expense                                                                                          |       | 363                                             |       | 290                                           |       | 888 |   | 970 |   |
| EBITDA                                                                                                      |       | 5,563                                           |       | 6,644                                         |       | 43,548 |   | 23,404 |   |
| Gain on sale of investment                                                                                  |       | —                                          |       | —                                        |       | (14,118 | ) | — |   |
| Adjusted EBITDA                                                                                             |       | $                                               | 5,563      |                                          | $          | 6,644 |   | $ | 29,430 |   | $ | 23,404 |   |
|                                                                                                        |       |                                            |       |                                          |       |   |   |   |   |
| **Reconciliation  of cash flow (used in) provided by operating activities to EBITDA and  Adjusted EBITDA:** |       |                                            |       |                                          |       |   |   |   |   |
| Cash flow (used in) provided by operating activities                                                        |       | $                                               | (39,431    | )                                             | $          | (44,350 | ) | $ | 101,297 |   | $ | 12,239 |   |
| Net changes in operating assets and liabilities                                                             |       | 42,108                                          |       | 48,918                                        |       | (64,476 | ) | 6,089 |   |
| Interest expense                                                                                            |       | 2,523                                           |       | 1,786                                         |       | 5,839 |   | 4,106 |   |
| Income tax expense                                                                                          |       | 363                                             |       | 290                                           |       | 888 |   | 970 |   |
| EBITDA                                                                                                      |       | 5,563                                           |       | 6,644                                         |       | 43,548 |   | 23,404 |   |
| Gain on sale of investment                                                                                  |       | —                                          |       | —                                        |       | (14,118 | ) | — |   |
| Adjusted EBITDA                                                                                             |       | $                                               | 5,563      |                                          | $          | 6,644 |   | $ | 29,430 |   | $ | 23,404 |   |

 

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The following table presents reconciliations ofdistributable cash flow to the most directly comparable GAAP financial measureson a historical basis for each period presented (in thousands):
| ** **                                                                                               | ** ** | **Three Months Ended  June 30,** | ** ** | **Six Months Ended  June 30,** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                               | ** ** | **2007**                                        | ** ** | **2006**                                      | ** ** | **2007** | ** ** | **2006** | ** ** |
| **Reconciliation  of net income to distributable cash flow:**                                            |       |                                            |       |                                          |       |   |   |   |   |
| Net income                                                                                               |       | $                                               | 610        |                                          | $          | 3,480 |   | $ | 33,485 |   | $ | 16,168 |   |
| Depreciation and amortization                                                                            |       | 2,067                                           |       | 1,088                                         |       | 3,336 |   | 2,160 |   |
| Gain on sale of investment                                                                               |       | —                                          |       | —                                        |       | (14,118 | ) | — |   |
| Maintenance capital expenditures                                                                         |       | (1,100                                          | )          | (411                                          | )          | (1,867 | ) | (515 | ) |
| Distributable cash flow                                                                                  |       | $                                               | 1,577      |                                          | $          | 4,157 |   | $ | 20,836 |   | $ | 17,813 |   |
|                                                                                                     |       |                                            |       |                                          |       |   |   |   |   |
| **Reconciliation  of cash flow (used in) provided by operating activities to distributable cash  flow:** |       |                                            |       |                                          |       |   |   |   |   |
| Cash flow (used in) provided by operating activities                                                     |       | $                                               | (39,431    | )                                             | $          | (44,350 | ) | $ | 101,297 |   | $ | 12,239 |   |
| Net changes in operating assets and liabilities                                                          |       | 42,108                                          |       | 48,918                                        |       | (64,476 | ) | 6,089 |   |
| Gain on sale of investment                                                                               |       | —                                          |       | —                                        |       | (14,118 | ) | — |   |
| Maintenance capital expenditures                                                                         |       | (1,100                                          | )          | (411                                          | )          | (1,867 | ) | (515 | ) |
| Distributable  cash flow                                                                                 |       | $                                               | 1,577      |                                          | $          | 4,157 |   | $ | 20,836 |   | $ | 17,813 |   |

 

***Consolidated Results***

Ourtotal sales for the second quarter of 2007 increased by $352.7 million, or 34%,to $1,384.1 million compared to $1,031.4 million for the same period in2006.  The increase was driven primarily by our terminal acquisitions in Albanyand Newburgh, New York and Burlington, Vermont in May 2007 and in Bridgeport,Connecticut and Macungie, Pennsylvania in 2006 and increased heating oil salesdue to colder-than-normal temperatures. Our aggregate volume of product sold increased by approximately 164million gallons, or 32%, to 683** **million gallons.  The increase in volume primarily includesincreases of 85 million and 91 million gallons in distillates and gasoline,respectively, as a result of our terminal acquisitions and higher-than-normalheating degree days.  The increase involume was offset by an 8** **million gallon decrease in residual oil.  The number of actual heating degree daysincreased 7% to 817 compared with 762 for the quarters ended June 30, 2007 and2006, respectively.  Our grossprofit for the second quarter of 2007 was $21.6** **million,an increase of $1.0** **million,or 5%, compared to $20.6 million for the same period in 2006.  The increase was primarily due to higher netproduct margins in our Wholesale segment for distillates and residual oil,offset by a decline in gasoline margins.

Ourtotal sales for the six months ended June 30, 2007 increased by $574.9 million,or 24%, to $2,957.3 million compared to $2,382.4 million for the same period in2006.  The increase was driven primarily by our terminal acquisitions in Albanyand Newburgh, New York and Burlington, Vermont in May 2007 and in Bridgeport,Connecticut and Macungie, Pennsylvania in 2006 and increased heating oil salesdue to colder-than-normal temperatures. Our aggregate volume of product sold increased by approximately 273million gallons, or 21%, to 1,589 million gallons.  The increase in volume primarily includesincreases of 182 million and 132 million gallons in distillates and gasoline,respectively, as a result of our terminal acquisitions and higher-than-normalheating degree days.  The increase involume was offset by a 33 million gallon decrease in residual oil.  The number of actual heating degree daysincreased by approximately 10% to 3,735 compared to 3,397 for the six monthsended June 30, 2007 and 2006, respectively. Our gross profit for the six months ended June30, 2007 was $63.9million, an increase of $11.0** **million,or 21% compared to $52.9** **millionfor the same period in 2006.  Theincreases in our gross profits for the three and six months ended June 30, 2007were primarily due to higher net product margins in distillates and residualoil.

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*Wholesale Segment*

Distillates.  Wholesale distillate sales for the threemonths ended June 30, 2007 were $584.1 million compared to $424.3 million for threemonths ended June 30, 2006.  During thefirst six months of 2007, wholesale distillate sales were $1,632.9 millioncompared to $1,284.8 million for the same period in 2006.  The increases of $159.8 million, or 38%, and$348.1 million, or 27%, for the three and six months ended June 30, 2007,respectively, were due to increases in volume sold and in distillate prices forthe three and six months ended June 30, 2007 compared to the same periods in2006.  We attribute the increases in volume sold to the 2006 terminalacquisitions in Bridgeport, Connecticut and Macungie, Pennsylvania and ourrecent terminal acquisitions in Albany and Newburgh, New York and Burlington,Vermont, as well as to temperatures that were 4% colder and 2% colder thannormal for the three and six months ended June 30, 2007, respectively, and7% colder and 10% colder than last year for the three and six months ended June** **30,** **2007,respectively.

Our net product margin contribution from distillatesales increased by $6.6 million, or 110%, to $12.6 million for the three monthsended June 30, 2007 and by $13.7 million, or 54%, to $39.3 million for the sixmonths ended June** **30,** **2007 compared to the same periods in 2006.  The increases were, in part, the result ofmargin expansion, volume expansion related to our terminal acquisitions inAlbany and Newburgh, New York and Burlington, Vermont in May 2007 andBridgeport, Connecticut and Macungie, Pennsylvania in 2006, and additionalvolume expansion due to colder-than-normal temperatures in 2007 and colderweather during the three and six months ended June 30, 2007 compared to thesame periods in 2006.

Gasoline.  Wholesale gasoline sales for the three monthsended June 30, 2007 were $698.0 million compared to $497.7 million for the sameperiod in 2006.  During the first sixmonths of 2007, wholesale gasoline sales were $1,079.3 million compared to$804.3 million for the same period in 2006. The increases of $200.3 million, or 40%, and $274.9 million, or 34%,for the three and six months ended June 30, 2007, respectively, were dueto our recent acquisition of the Albany and Newburgh, New York and Burlington,Vermont terminals and increases ingasoline volume sold and prices.

Ournet product margin from gasoline sales decreased by $4.8 million, or 68%, to$2.3 million for the three months ended June 30, 2007 and by $6.5 million, or62%, to $3.9 million for the six months ended June 30, 2007 compared to thesame periods in 2006.  We attribute thesedecreases in net product margin to thereturn of margins to more historical norms as the industry adjusts to theintroduction of ethanol-based gasoline, narrower net product margins generallyand some initial start-up supply costs at the new Albany and Newburgh, New Yorkand Burlington, Vermont terminals.

ResidualOil.  Wholesale residualoil sales for the three months ended June 30, 2007 were $22.1 millioncompared to $28.8 million for the three months ended June 30, 2007.  During the first six months of 2007, residualoil sales were $32.7 million compared to $58.6 million for the same period in2006.  The decreases of $6.7 million, or23%, and $25.9 million, or 44%, for the three and six months ended June30, 2007, respectively, compared to the same periods in 2006 were the result ofdeclines in residual oil volume soldattributable to competitive pricing and competition from alternative products.

Our net product margin contribution fromresidual oil sales increased $0.2 million, or 4%, to $5.5 million for the threemonths ended June 30, 2007 and $5.4 million, or 55%, to $15.4 million for thesix months ended June 30, 2007 compared to the same periods in 2007, primarilydue to favorable market conditions.

*Commercial Segment*

Inour Commercial segment, residual oil accounted for approximately 74% and 78% oftotal commercial volume sold for the three months ended June 30, 2007 and 2006,respectively, and approximately 78% and 82% of total commercial volume sold forthe six months ended June 30, 2007 and 2006, respectively.  Distillates, gasoline and natural gas accountedfor the remainder of the total volume sold.

Commercialresidual oil sales for the quarter ended June 30, 2007 decreased by 4% comparedto the same period in 2006 due to an 8% decrease in volume sold.  For the six months ended June 30, 2007,residual oil sales decreased by 14% compared to the same period in 2006 due toa 14% decrease in volume sold.  Weattribute the decreases in volume sold to competitive pricing and competitionfrom alternative products.

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*Selling,General and Administrative Expenses*

Attributed,in part, to the extension of our terminal network, SG&A expenses increasedby $2.1 million, or 22%, to $11.5 million for the three months ended June** **30, 2007 compared to $9.4 million for the same periodin 2006.  During the second quarter of 2007,we had increases of approximately $1.2 million in salaries and accrued bonuses,$0.3 million in licensing fees and insurance premiums, $0.1 million inprofessional and consulting fees and $0.5 million in other SG&A expenses.

Duringthe six months ended June 30, 2007, SG&A expenses increased by $4.5million, or 22%, to $24.9** **millioncompared to $20.3 million for the same period in 2006.  The increase was primarily due toapproximately $2.3** **millionin salaries and accrued bonuses, $0.9 million in professional and consultingfees, $0.4 million in licensing fees and insurance premiums, $0.3 millionrelated to employee vacation benefits and $0.6 million in other SG&Aexpenses.

*Operating Expenses*

Operatingexpenses increased by $1.0 million, or 19%, to $6.3 million for thethree months ended June 30, 2007 compared to $5.3 million for the sameperiod in 2006.  The increase wasprimarily due to $0.6 million in costs associated with operating our newlyacquired Albany and Newburgh, New York and Burlington, Vermont terminals,$0.4 million in costs associated with operating our Bridgeport,Connecticut and Macungie, Pennsylvania facilities, $0.1 million inincreased rent for additional tankage and $0.1 million in repair expensesat the Capital Terminal in East Providence, Rhode Island and $0.2 millionin other operating expenses, offset by $0.4 million for the expansion ofstorage and delivery systems at an alternative location in New Bedford,Massachusetts during the second quarter of 2006.

Operatingexpenses for the six months ended June 30, 2007 increased by $1.4 million, or13%, to $12.2 million compared to $10.8 million for the same period in2006.  The increase was primarily due to$0.8 million in costs associated with operating our Bridgeport,Connecticut and Macungie, Pennsylvania facilities, $0.6 million in costsassociated with operating our newly acquired Albany and Newburgh, New York andBurlington, Vermont terminals, $0.1 million in increased rent at ourGateway terminal, $0.1 million in increased rent for additional tankageand $0.1 million in repair expenses at the Capital Terminal in EastProvidence, Rhode Island and $0.5 million in other operating expenses,offset by $0.3 million in pipeline repair expenses and $0.5 million forthe expansion of storage and delivery systems at an alternative location in NewBedford, Massachusetts incurred during the six months ended June 30, 2006.

***Interest Expense***

***Interest expense for the three monthsended June 30, 2007 increased by $0.7 million, or 41%, to $2.5*** million compared to $1.8 million for the same periodin 2006.  Interest expense for the sixmonths ended June 30, 2007 increased by $1.7 million, or 42%, to $5.8 millioncompared to $4.1 million for the same period in 2006.  We attribute the increases primarily to borrowingon our acquisition facility to fund the acquisition of the Albany and Newburgh,New York and Burlington, Vermont terminals, higher average balances on our revolving line ofcredit and higher average interest rates during the three and six months endedJune 30, 2007.

***Other Income***

***Other income for the three and six monthsended June 30, 2006 represented dividend income from our ownership interest inour NYMEX seats and related holdings.  InMarch 2007, we sold our investment in NYMEX Holdings, Inc. along with our NYMEXseats and, as a result, other income was not recognized for the three and sixmonths ended June*** 30, 2007.  See Note11 of Notes to Financial Statements.

***Gain on Sale of Investment***

***The $14.1 million gain on sale ofinvestment for the six months ended June 30, 2007 represented the amount werealized on the March 2007 sale of our NYMEX seats and holdings.  See Note 11 of Notes to Financial Statements.***

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**Liquidityand Capital Resources**

***Liquidity***

Our primary liquidity needs are to fund our capitalexpenditures and our working capital requirements.  Cash generated from operations and ourworking capital revolving credit facility provide our primary sources ofliquidity.  Working capital was $143.8million at June 30, 2007 compared to $148.3 million at December 31, 2006.

On February 8, 2007, we and certain of oursubsidiaries filed a universal shelf registration statement on Form S-3with the SEC to register the issuance and sale, from time to time and in suchamounts as is determined by market conditions and our needs, of up to$400.0 million of our common units and debt securities of both us andcertain of our subsidiaries.  We will usethe net proceeds from the sale of the securities covered by the shelfregistration for general partnership purposes, which may include debtrepayment, future acquisitions, capital expenditures and additions to workingcapital.  On April 3, 2007, we filedan amendment to the registration statement, and on April 9, 2007, theSEC declared the registration statement effective.

On May 9,2007, we issued 1,785,715 Class B units in a private placement from which wereceived gross proceeds of $50.0 million. The Class B units were convertible into common units on a one-for-onebasis.  In connection with the issuanceof the Class B units, we agreed to a discount in the purchase price ofapproximately $0.8** **million, which is the amountequal to the product of (i) the number of issued and outstanding Class B unitsand (ii) $0.4650, the amount of our first quarter per unit distribution thatwas paid to the common and subordinated unitholders on May 15, 2007.  Such discount was paid by us to the purchasersof the Class B units substantially contemporaneously with the payment of ourfirst quarter distribution.  On May** **22,2007, the Class B units converted into common units on a one-for-onebasis.  See Note 12 of Notes to FinancialStatements for additional information on the private placement.

On May 9,2007, we completed the acquisition of three refined petroleum productsterminals located in Albany and Newburgh, New York and Burlington, Vermont fromExxonMobil for cash consideration of approximately $101.5** **millionplus $1.1** **million in acquisition costs, for an aggregate purchaseprice of $102.6** **million.  We financed the acquisition through anexpansion of our credit facility, proceeds from the sale of our NYMEX Holdingsshares and related NYMEX seats and the private placement of Class B units discussedabove.  See Note 13 of Notes to FinancialStatements for additional information on the acquisition.

On May 15, 2007, we paid a cash distribution of $5.4million for the first quarter of 2007 to our common and subordinatedunitholders of record as of the close of business on May 4, 2007.

On July 24,2007, our General Partner’s board of directors declared a quarterly cashdistribution of $0.4725 per unit on all of our outstanding common andsubordinated units for the second quarter of 2007 to our common andsubordinated unitholders of record as of the close of business August 3,2007.  We expect to pay the cashdistribution of approximately $6.3 million on August 14, 2007.

On August 6, 2007,pursuant to the Registration Rights Agreement described in Note 12 of Notes toFinancial Statements, we filed a Registration Statement on Form S-3 with theSEC for the registration of 1,785,715 common units.  This Registration Statement is intended tosatisfy our obligation to register the common units into which Class B unitsissued to the Purchasers in the Private Placement described in Note 12 of Notesto Financial Statements converted on May 22, 2007.

***Capital Expenditures***

Our terminallingoperations require investments to expand, upgrade and enhance existing operationsand to meet environmental and operations regulations.  Our capital requirements primarily consist ofmaintenance capital expenditures and capital improvement expenditures.  Maintenance capital expenditures representcapital expenditures to replace partially or fully depreciated assets tomaintain the operating capacity of, or sales generated by, existing assets andextend their useful lives, such as expenditures required to maintain equipmentreliability, tankage and pipeline integrity and safety, and to addressenvironmental regulations.  We hadapproximately $1.9 million and $0.5 million in maintenance capitalexpenditures for the six months ended June 30, 2007 and 2006, respectively,which are included in capital expenditures in the accompanying consolidatedstatements of cash flows.  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.

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Capitalimprovement expenditures include expenditures to acquire assets to grow ourbusiness and to expand existing facilities, such as projects that increaseoperating capacity by increasing tankage or adding terminals.  We had approximately 1.1 million and$2.7 million in capital improvement expenditures for the six months endedJune 30, 2007 and 2006, respectively, which are included in capitalexpenditures in the accompanying consolidated statements of cash flows, toincrease our operating capacity and capabilities.  In addition, in May of 2007, we acquiredthree refined petroleum products terminals located in Albany and Newburgh, NewYork and Burlington, Vermont from ExxonMobil for cash consideration ofapproximately $101.5 millionplus $1.1 millionin acquisition costs, for an aggregate purchase price of $102.6million.  In May of 2006, we acquired theBridgeport, Connecticut facility for approximately $2.3 million.

We also made someinvestments in our information technology infrastructure to maintain uniformityamong all our locations as we add acquired assets.  For example, we are implementing anenterprise wide system that provides us real-time access to information aboutinventory, pricing and sales by locations.

We anticipate thatmaintenance capital expenditures will be funded with cash generated byoperations.  We believe that we will havesufficient liquid assets, cash flow from operations, borrowing capacity underour credit agreement and the ability to issue additional common units and/ordebt securities under our shelf registration statement to meet our financialcommitments, debt service obligations, contingencies and anticipated capitalexpenditures.  However, we are subject tobusiness and operational risks that could adversely affect our cash flow.  A material decrease in our cash flows wouldlikely produce an adverse effect on our borrowing capacity.

***Cash Flow***

The followingtable summarizes cash flow activity (in thousands):

|                                            | ** ** | **Six Months Ended  June 30,** | ** ** |
|--------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                 | ** ** | **2007**                                      | ** ** | **2006** | ** ** |
|                                       |       |                                          |       |   |   |
| Net cash  provided by operating activities |       | $                                             | 101,297    |   | $ | 12,239 |   |
| Net cash used in  investing activities     |       | $                                             | (90,375    | ) | $ | (5,494 | ) |
| Net cash used in  financing activities     |       | $                                             | (12,256    | ) | $ | (7,574 | ) |

 

Cash flow fromoperating activities generally increases during the second quarter sinceaccounts receivable, accounts payable and inventories generally contract as weenter the season when sales from heat-based products are lower.  Net cash provided by operating activitiesincreased by $89.1 million for the six months ended June 30, 2007 compared tothe same period in 2006 and primarily reflects increased earnings of $17.3million, a $75.7 million change in fair value of our forward fixed contracts asthese contracts are honored by our customers during our heating season and a$48.6 million decrease in inventories as we exit our peak season, offset by theincrease in the carrying value of accounts receivable due to increased salesassociated with our recent terminal acquisitions and colder-than-normaltemperatures.

Net cash used ininvesting activities increased by $84.9 million for the six months June 30,2007 compared to the same period in 2006, and included approximately $102.6million to acquire the Albany and Newburgh, New York and Burlington, Vermontterminals and a total of $3.0 million in other capital expenditures, offset bygross proceeds of $15.3 millionfrom the sale of our investment in NYMEX Holdings and related NYMEX seats.

Net cash used infinancing activities increased by $4.7 million for the six months ended June 30, 2007compared to the same period in 2006 and included a net change in our creditfacilities of $50.6 million consisting of $87.1 million in payments on ourrevolving line of credit and $36.5 million in proceeds from ouracquisition line of credit to fund the purchase of the Albany and Newburgh, NewYork and Burlington, Vermont terminals, and $10.6 million in cash distributionsto our common and subordinated unitholders for the six months ended June 30,2007, offset by net proceeds of $49.1 million from the issuance of Class Bunits.

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***Credit Agreement***

We, our generalpartner, our operating company and our operating subsidiaries have a four-yearsenior secured credit agreement with total available commitments of $650.0million.  We repay amounts outstandingand reborrow funds based on our working capital requirements and, therefore,classify as a current liability the portion of the revolving line of credit weexpect to pay down during the course of the year.  The long-term portion of the revolving lineof credit is the amount we expect to be outstanding during the entireyear.  The credit agreement will matureon April 22, 2011.

At June 30, 2007,there were three facilities under our credit agreement that included thefollowing:

·              a working capitalrevolving credit facility to be used for working capital purposes and lettersof credit in the principal amount equal to the lesser of our borrowing base and$550.0 million, of which two $50.0 million seasonal overline facilities areavailable each year only during the period between September 1st and June 30th;

·              an $85.0 millionacquisition facility to be used for funding acquisitions similar to ourbusiness line that have a purchase price of $25.0 million or less or $35.0million or less in the aggregate in any 12-month period; and

·              a $15.0 millionrevolving credit facility to be used for general purposes, including payment ofdistributions to our unitholders.

In addition, provided noEvent of Default (as defined in the Credit Agreement) then exists, the we mayrequest to increase:  (1) the acquisitionfacility by up to another $50.0 million, for a total acquisition facility of upto $135.0 million; and (2) the working capital revolving credit facility by upto another $100.0 million,for a total working capital revolving credit facility of up to $650.0million.  Any such request for anincrease by us must be in a minimum amount of $5.0 million, and no more thanthree such requests may be made for each facility.

At June 30, 2007,borrowings under our working capital revolving credit, acquisition andrevolving credit facilities bear interest at our option at (1) the Eurodollarrate, plus 1%, 11⁄2% and 11⁄2%, respectively, (2) the cost of funds rate, plus 1%,13⁄4% and 11⁄2%, respectively, or (3) the bank’s base rate.  The average interest rates for the three andsix months ended June 30, 2007 were 6.4% and 6.3%, respectively.  We incur a letter of credit fee of 1% perannum for each letter of credit issued. In addition, we incur a commitment fee on the unused portion of thethree facilities under the Credit Agreement (including the unused portion ofeither of the seasonal overline facilities exercised by us) at a rate of 25basis points per annum, a facility fee of 10 basis points per annum on anyunexercised seasonal overline facility during the period between September 1st and June 30th and a seasonal overline fee of $30,000 eachtime we elect to exercise either of the seasonal overline facilities.  As of June 30, 2007, we had total borrowingsoutstanding under our working capital revolving credit facility of $220.1million and outstanding letters of credit of $59.0 million, for a totalindebtedness of $279.1 million.

Our obligationsunder the Credit Agreement are secured by substantially all of our assets andthe assets of our operating company and operating subsidiaries.

***Off-Balance Sheet Arrangements***

We have nooff-balance sheet arrangements.

**Critical Accounting Policies and Estimates**

Management’sDiscussion and Analysis of Financial Condition and Results of Operationsdiscusses our consolidated financial statements, which have been prepared inaccordance with GAAP.  The preparation ofthese financial statements requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reportingperiod.  Actual results may differ fromthese estimates under different assumptions or conditions.

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These estimatesare based on our knowledge and understanding of current conditions and actionsthat we may take in the future.  Changesin these estimates will occur as a result of the passage of time and theoccurrence of future events.  We haveidentified the following estimates that, in our opinion, are subjective innature, require the exercise of judgment, and involve complex analysis:  inventory, leases, revenue recognition,derivative financial instruments and environmental and other liabilities.

The significantaccounting policies and estimates that we have adopted and followed in thepreparation of our consolidated financial statements are detailed in Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—CriticalAccounting Policies and Estimates” and Note 2 of Notes to Financial Statements,“Summary of Significant Accounting Policies” included in our Annual Report onForm 10-K for the year ended December 31, 2006. 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.

**Recent Accounting Pronouncements**

A description andrelated impact expected from the adoption of certain new accountingpronouncements is provided in Note 17 of Notes to Financial Statements.

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

Market risk is therisk of loss arising from adverse changes in market rates and prices.  The principal market risks to which we areexposed are interest rate risk and commodity risk.  We utilize one interest rate collar to manageexposure to interest rate risk and various derivative instruments to manageexposure to commodity risk.

***Interest Rate Risk***

We utilizevariable rate debt and are exposed to market risk due to the floating interestrates on our credit facility and term loan. Therefore, from time to time, we may utilize interest rate swaps andcollars to hedge interest obligations on specific and anticipated debtissuances.

Borrowings underour working capital revolving credit, acquisition credit and revolving creditfacilities bear interest at our option at (1) the Eurodollar rate, plus 1%, 11⁄2%and 11⁄2 %, respectively, (2) the cost of funds rate, plus 1%, 13⁄4% and 11⁄2 %,respectively, or (3) the bank’s base rate (the average rates for the three andsix months ended June** **30, 2007were 6.4% and 6.3%, respectively).  As ofJune 30, 2007, we had total borrowings outstanding under our working capitalrevolving credit facility of $220.1 million. The impact of a 1% increase in the interest rate on this amount of debtwould have resulted in an increase in interest expense, and a correspondingdecrease in our results of operations, of approximately $2.2 million annually,assuming, however, that our indebtedness remained constant throughout the year.

On May 10, 2007, we executed a zero premium interest ratecollar with a major financial institution. The collar, which became effective on May 14, 2007, is used to hedge thevariability in interest payments due to changes in the three-month LIBOR ratewith respect to $100.0 million of long-term three-month LIBOR-basedborrowings.  Under the contract, wecapped our exposure at a maximum three-month LIBOR rate of 5.75%.  In addition, we established a minimum floorthree-month LIBOR rate of 3.75%.  As ofJune 30, 2007, the three-month LIBOR rate of 5.36% was within the cap andfloor.  Whenever the three-month LIBORrate is greater than the cap, we receive from the financial institution thedifference between the cap and the current three-month LIBOR rate on the $100.0million of long-term three-month LIBOR-based borrowings.  Conversely, whenever the three-month LIBORrate is lower than the floor, we remit to the financial institution thedifference between the floor and the current three-month LIBOR rate on the$100.0 million of long-term three-month LIBOR-based borrowings.  As of June 30, 2007, the three-month LIBORrate of 5.36% was within the cap and floor. The collar, which expires on May 14, 2011, is designated as a cash flowhedge and accounted for under the provisions of SFAS No. 133, as amended (seeNote 5 of Notes to Financial Statements).

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***Commodity Risk***

We hedge ourexposure to price fluctuations with respect to refined petroleum products instorage and expected purchases and sales of these commodities.  The derivative instruments utilized consistprimarily of futures and option contracts traded on the NYMEX and over-the-countertransactions, including swap contracts entered into with established financialinstitutions and other credit-approved energy companies.  Our policy is generally to purchase onlyproducts for which we have a market and to structure our sales contracts sothat price fluctuations do not materially affect our profit.  While our policies are designed to minimizemarket risk, some degree of exposure to unforeseen fluctuations in marketconditions remains.  Except for thecontrolled trading program discussed below, we do not acquire and hold futurescontracts or other derivative products for the purpose of speculating on pricechanges that might expose us to indeterminable losses.

While we seek tomaintain a position that is substantially balanced within our product purchaseactivities, we may experience net unbalanced positions for short periods oftime as a result of variances in daily sales and transportation and deliveryschedules as well as logistical issues associated with inclement weatherconditions.  In connection with managingthese positions and maintaining a constant presence in the marketplace, bothnecessary for our business, we engage in a controlled trading program for up toan aggregate of 250,000 barrels of refined petroleum products.

We enter intofuture contracts to minimize or hedge the impact of market fluctuations on ourpurchase and fixed forward sales of refined petroleum products.  Any hedge ineffectiveness is reflected in ourresults of operations.  We utilize theNYMEX, which is a regulated exchange for energy products that it trades,thereby reducing potential delivery and supply risks.  Generally, our practice is to close all NYMEXpositions rather than to make or receive physical deliveries.  With respect to other energy products, weenter into derivative agreements with counterparties that we believe have astrong credit profile, in order to hedge market fluctuations and/or lock-inmargins relative to our commitments.

At June 30, 2007,the fair value of all of our commodity risk derivative instruments and thechange in fair value that would be expected from a 10% price decrease are shownin the table below (in thousands):

Gain (loss):

|                                | ** ** | **Fair Value at  June 30, 2007** | ** ** | **Effect of 10%  Price Decrease** | ** ** | ** ** |
|--------------------------------|------------|------------------------------------------------------|------------|--------------------------------------------------|------------|------------|
|                           |       |                                                 |       |                                             |       |       |
| NYMEX contracts                |       | $                                                    | 2,405      |                                             | $          | 8,591      |   |   |
| Swaps, options  and other, net |       | (795                                                 | )          | 654                                              |       |       |
|                           |       | $                                                    | 1,610      |                                             | $          | 9,245      |   |   |

 

The fair values ofthe futures contracts are based on quoted market prices obtained from theNYMEX.  The fair value of the swaps andoption contracts are estimated based on quoted prices from various sources suchas independent reporting services, industry publications and brokers.  These quotes are compared to the contractprice of the swap, which approximates the gain or loss that would have beenrealized if the contracts had been closed out at June 30, 2007.  For positions where independent quotationsare not available, an estimate is provided, or the prevailing market price atwhich the positions could be liquidated is used.  All hedge positions offset physical exposuresto the spot market; none of these offsetting physical exposures are included inthe above table.  Price-risksensitivities were calculated by assuming an across-the-board 10% decrease inprice regardless of term or historical relationships between the contractualprice of the instruments and the underlying commodity price.  In the event of an actual 10% change inprompt month prices, the fair value of our derivative portfolio would typicallychange less than that shown in the table due to lower volatility in out-monthprices.  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$4.6 million at June 30, 2007.

We are exposed tocredit loss in the event of nonperformance by counterparties of forwardcontracts, options and swap agreements, but do not anticipate nonperformance byany of these counterparties.  Futurescontracts, the primary derivative instrument utilized, are traded on regulatedexchanges, greatly reducing potential credit risks.  Exposure on swap and certain optionagreements is limited to the amount of the recorded fair value as of thebalance sheet dates.  We utilizeprimarily one broker, a major financial institution, for all derivativetransactions and the right of offset exists. Accordingly, the fair value of all derivative instruments is displayedon a net basis.

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**Item 4.        Controlsand Procedures**

Indesigning and evaluating controls and procedures, management recognizes thatany controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving the desired control objectives,and management is required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

***Disclosure Controls and Procedures***

Ourmanagement, with the participation of our principal executive officer and principalfinancial officer, evaluated the effectiveness of our disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) of the SecuritiesExchange Act of 1934 (the “Exchange Act”)) as of the fiscal quarter ended June30, 2007.  Based on this evaluation, ourprincipal executive officer and principal financial officer have concluded thatour disclosure controls and procedures are effective to ensure that theinformation required to be disclosed by us in the reports we file or submit underthe Exchange Act is recorded, processed, summarized and reported within thetime periods specified in SEC rules and forms and accumulated and communicatedto our management, including our principal executive officer and principalfinancial officer, as appropriate, to allow timely decisions regarding requireddisclosure.

***Internal Control overFinancial Reporting***

There has not been any change in our internal controlover financial reporting (as defined in Rule 13a-15(f) of the Exchange Act)that occurred during the fiscal quarter ended June 30, 2007 that has materiallyaffected, or is reasonably likely to materially affect, our internal controlover financial reporting.

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**PARTII.  OTHER INFORMATION**

**Item 1.        LegalProceedings**

Although we may,from time to time, be involved in litigation and claims arising out of ouroperations in the normal course of business, we do not believe that we are aparty to any litigation that will have a material adverse impact on ourfinancial condition or results of operations. Except as described below and in our Annual Report on Form 10-K for theyear ended December 31, 2006, we are not aware of any significant legal orgovernmental proceedings against us, or contemplated to be brought againstus.  We maintain insurance policies withinsurers in amounts and with coverage and deductibles as our general partnerbelieves are reasonable and prudent. However, we can provide no assurance that this insurance will beadequate to protect us from all material expenses related to potential futureclaims for personal and property damage or that these levels of insurance willbe available in the future at economical prices.

In November 2006,the EPA notified Global Companies LLC, as the operator of a refined petroleumproduct marketing and bulk storage terminal in Macungie, Pennsylvania of theEPA’s intention to negotiate an AOC with Global Companies LLC and the previousowner and owners of an adjacent terminal, to investigate and remediate in thesoil and groundwater at the two sites. In July 2007, Global Companies LLC and the previous owner of the GlobalMacungie Terminal executed an AOC with the EPA requiring investigatoryactivities, including additional groundwater monitoring and soil sampling atthe Global Macungie Terminal.  Inaddition, the AOC executed by Global Companies LLC does not impose anyobligations on Global Companies LLC relative to the adjacent terminal.  At the same time, the parties associated withthe adjacent terminal entered into separate AOCs with the EPA.  Although we cannot predict the outcome ofsaid additional investigation of the Global Macungie Terminal, based upon ourcurrent information, we do not anticipate that either outcome will have amaterial adverse effect on us. Furthermore, we do not believe that compliance with the terms of the AOCexecuted by us will result in material costs or have a material impact on ouroperations.

In connection withour May 2007 acquisition of ExxonMobil’s Albany and Newburgh, New York andBurlington, Vermont terminals, we assumed certain environmental liabilities,including the remediation obligations under a proposed remedial action plansubmitted by ExxonMobil to the NYDEC with respect to the Albany, New Yorkterminal.  In connection with theacquisition, we recorded an environmental reserve of $8.0** **millionin respect of the assumed environmental liabilities.  NYDEC is currently reviewing the proposedremedial action plan submitted by ExxonMobil. Subject to NYDEC’s approval of the proposed remedial action plan, we donot believe that compliance with the terms thereof will result in materialcosts in excess of the environmental reserve or have a material impact on ouroperations.

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**Item 1A.     RiskFactors**

Please refer toour Annual Report on Form 10-K for the year ended December 31, 2006 foradditional risk factors.

***Tax Risks***

***Wehave adopted certain valuation methodologies that may result in a shift ofincome, gain, loss and deduction between the general partner and theunitholders.  The IRS may challenge thistreatment, which could adversely affect the value of the common units.***

Whenwe issue additional units or engage in certain other transactions, we determinethe fair market value of our assets and allocate any unrealized gain or lossattributable to our assets to the capital accounts of our unitholders and ourgeneral partner.  Although we may fromtime to time consult with professional appraisers regarding valuation matters,including the valuation of our assets, we make many of the fair market valueestimates of our assets ourselves using a methodology based on the market valueof our common units as a means to measure the fair market value of ourassets.  Our methodology may be viewed asunderstating the value of our assets.  Inthat case, there may be a shift of income, gain, loss and deduction betweencertain unitholders and the general partner, which may be unfavorable to suchunitholders.  Moreover, under our currentvaluation methods, subsequent purchasers of common units may have a greaterportion of their Internal Revenue Code Section 743(b) adjustment allocated toour tangible assets and a lesser portion allocated to our intangibleassets.  The IRS may challenge ourvaluation methods, or our allocation of the Section 743(b) adjustmentattributable to our tangible and intangible assets, and allocations of income,gain, loss and deduction between the general partner and certain of ourunitholders.

Asuccessful IRS challenge to these methods or allocations could adversely affectthe amount of taxable income or loss being allocated to our unitholders.  It also could affect the amount of gain fromour unitholders’ sale of common units and could have a negative impact on thevalue of the common units or result in audit adjustments to our unitholders’tax returns without the benefit of additional deductions.

39

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**Item 6.        Exhibits**
| 3.1    |   | — |   | Second Amended and Restated Agreement of Limited  Partnership of Global Partners LP, dated as of May 9, 2007 (incorporated  herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on  May 10, 2007).                                                                                                                                                                                                                                                                      |
|--------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
| 4.1    |   | — |   | Registration Rights Agreement, dated May 9, 2007, by  and between Global Partners LP and the purchasers named therein (incorporated  herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on  May 10, 2007).                                                                                                                                                                                                                                                             |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
| 10.1   |   | — |   | Terminals Sale and Purchase Agreement, dated March  16, 2007, by and between Global Partners LP and ExxonMobil Oil Corporation.                                                                                                                                                                                                                                                                                                                                                                |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
| 10.2   |   | — |   | Third Amendment to Credit Agreement, dated as of  April 24, 2007, among Global Operating LLC, Global Companies LLC, Global  Montello Group Corp., Glen Hes Corp. and Chelsea Sandwich LLC, as borrowers,  Global Partners LP and Global GP LLC, as guarantors, each lender from time to  time party thereto, and Bank of America, N.A., as Administrative Agent and  L/C Issuer (incorporated herein by reference to Exhibit 10.1 to the Current  Report on Form 8-K filed on April 26, 2007). |
|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   |   |   |
| 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.                                                                                                                                                                                                                                                                                                                                                                                |

----

**†****                     **Notdeemed “filed” for purposes of Section 18 of the Securities Exchange Act of1934 or otherwise subject to the liability of that section.

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                       | **GLOBAL PARTNERS LP** |
|-----------------------|------------------------|
|                  | By:                    | Global GP LLC, | ** ** | ** ** | ** ** | ** ** |
|                  |                   | its general partner | ** ** | ** ** | ** ** | ** ** |
|                  |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                  |                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Dated: August 9, 2007 |                   | By: | /s/ Eric Slifka |
|                  |                   |   | Eric Slifka | ** ** | ** ** |
|                  |                   |   | President and Chief Executive Officer | ** ** | ** ** |
|                  |                   |   | (Principal Executive Officer) | ** ** | ** ** |
|                  |                   |   |   | ** ** | ** ** |
|                  |                   |   |   | ** ** | ** ** |
| Dated: August 9, 2007 |                   | By: | /s/ Thomas J. Hollister |
|                  |                   |   | Thomas J. Hollister |
|                  |                   |   | Executive Vice President, Chief Operating Officer  and Chief Financial Officer |
|                  |                   |   | (Principal Financial Officer) | ** ** | ** ** |

 

41

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**INDEX TO EXHIBITS**
| Exhibit  Number | ** ** | ** ** | **Description** |
|-----------------|------------|------------|-----------------|
|            |       |       |            |   |
| 3.1             |       | —     |            | Second Amended and Restated Agreement of Limited  Partnership of Global Partners LP, dated as of May 9, 2007 (incorporated  herein by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on  May 10, 2007). |
|            |       |       |            |   |   |   |   |   |
| 4.1             |       | —     |            | Registration Rights Agreement, dated May 9, 2007, by  and between Global Partners LP and the purchasers named therein (incorporated  herein by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on  May 10, 2007). |
|            |       |       |            |   |   |   |   |   |
| 10.1            |       | —     |            | Terminals Sale and Purchase Agreement, dated March  16, 2007, by and between Global Partners LP and ExxonMobil Oil Corporation. |
|            |       |       |            |   |   |   |   |   |
| 10.2            |       | —     |            | Third Amendment to Credit Agreement, dated as of  April 24, 2007, among Global Operating LLC, Global Companies LLC, Global  Montello Group Corp., Glen Hes Corp. and Chelsea Sandwich LLC, as borrowers,  Global Partners LP and Global GP LLC, as guarantors, each lender from time to  time party thereto, and Bank of America, N.A., as Administrative Agent and  L/C Issuer (incorporated herein by reference to Exhibit 10.1 to the Current  Report on Form 8-K filed on April 26, 2007). |
|            |       |       |            |   |   |   |   |   |
| 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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**†****                     **Notdeemed “filed” for purposes of Section 18 of the Securities Exchange Act of1934 or otherwise subject to the liability of that section.

42

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