Edgar Filing: GLOBAL PARTNERS LP

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(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, 2009

	OR

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

	For the transition period from to

Commission file number 001-32593

Global Partners LP

(Exact name of registrant as specified in its charter)

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes o No o

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

Large accelerated filer o	Accelerated filer x	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined 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 units outstanding as of August 4, 2009.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008

Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008

Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008

Consolidated Statements of Partners’ Equity for the six months ended June 30, 2009

Notes to Consolidated 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 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 6. Exhibits

SIGNATURES

INDEX TO EXHIBITS

Table of Contents

Item 1. Financial Statements

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

	June 30,			December 31,
	2009			2008
Assets
Current assets:
Cash and cash equivalents	$	2,962		$	945
Accounts receivable, net	190,621			249,418
Accounts receivable—affiliates	1,071			2,518
Inventories	369,353			240,346
Brokerage margin deposits	25,863			8,991
Fair value of forward fixed price contracts	8,598			161,787
Prepaid expenses and other current assets	31,570			29,302
Total current assets	630,038			693,307
Property and equipment, net	162,434			161,988
Intangible assets, net	29,939			31,403
Other assets	3,158			2,564
Total assets	$	825,569		$	889,262

Liabilities and partners’ equity
Current liabilities:
Accounts payable	$	132,223		$	219,783
Working capital revolving credit facility—current portion	135,814			208,210
Environmental liabilities—current portion	3,296			4,191
Accrued expenses and other current liabilities	63,776			54,054
Income taxes payable	—			520
Obligations on forward fixed price contracts	14,300			7,954
Total current liabilities	349,409			494,712
Working capital revolving credit facility—less current portion	228,986			154,090
Acquisition facility	71,200			71,200
Environmental liabilities—less current portion	2,314			2,377
Accrued pension benefit cost	9,103			8,853
Deferred compensation	1,752			1,663
Other long-term liabilities	9,294			12,899
Total liabilities	672,058			745,794

Partners’ equity
Common unitholders (7,428,139 units issued and 7,367,781 outstanding at June 30, 2009 and 7,428,139 units issued and outstanding at December 31, 2008)	166,335			163,092
Subordinated unitholders (5,642,424 units issued and outstanding at June 30, 2009 and December 31, 2008)	(1,274		)	(4,189		)
General partner interest (1.73% interest with 230,303 equivalent units outstanding at June 30, 2009 and December 31, 2008)	(53		)	(172		)
Accumulated other comprehensive loss	(11,497		)	(15,263		)
Total partners’ equity	153,511			143,468
Total liabilities and partners’ equity	$	825,569		$	889,262

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

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

Sales	$	1,201,149		$	2,297,709		$	2,834,104		$	5,018,701
Cost of sales	1,173,360			2,275,036			2,755,601			4,960,412
Gross profit	27,789			22,673			78,503			58,289

Costs and operating expenses:
Selling, general and administrative expenses	13,299			10,182			31,374			21,255
Operating expenses	9,137			8,771			17,612			17,796
Amortization expenses	803			737			1,603			1,461
Total costs and operating expenses	23,239			19,690			50,589			40,512

Operating income	4,550			2,983			27,914			17,777

Interest expense	(3,422		)	(4,087		)	(7,198		)	(10,117		)

Income (loss) before income tax expense	1,128			(1,104		)	20,716			7,660

Income tax expense	(150		)	(150		)	(875		)	(295		)

Net income (loss)	978			(1,254		)	19,841			7,365

Less: General partner’s interest in net income, including incentive distribution rights	(67		)	(28		)	(443		)	(227		)

Limited partners’ interest in net income (loss)	$	911		$	(1,282	)	$	19,398		$	7,138

Basic net income (loss) per limited partner unit	$	0.07		$	(0.10	)	$	1.48		$	0.55

Diluted net income (loss) per limited partner unit	$	0.07		$	(0.10	)	$	1.46		$	0.55

Basic weighted average limited partner units outstanding	13,059			13,071			13,065			13,071

Diluted weighted average limited partner units outstanding	13,356			13,071			13,273			13,071

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

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2009			2008

Cash flows from operating activities
Net income	$	19,841		$	7,365
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	7,460			7,111
Amortization of deferred financing fees	578			381
Loss on disposition of property and equipment and other	—			6
Bad debt expense	1,155			60
Stock-based compensation expense	917			390
Changes in operating assets and liabilities:
Accounts receivable	57,642			37,071
Accounts receivable – affiliate	1,447			(890		)
Inventories	(129,007		)	(3,153		)
Broker margin deposits	(16,872		)	(2,941		)
Prepaid expenses, all other current assets and other assets	(3,520		)	(5,442		)
Accounts payable	(87,559		)	(40,359		)
Income taxes payable	(578		)	109
Change in fair value of forward fixed price contracts	159,535			(7,491		)
Accrued expenses and all other current liabilities	9,142			1,810
Net cash provided by (used in) operating activities	20,181			(5,973		)

Cash flows from investing activities
Capital expenditures	(6,303		)	(5,523		)
Proceeds from sale of property and equipment	—			13
Net cash used in investing activities	(6,303		)	(5,510		)

Cash flows from financing activities
Proceeds from credit facilities, net	2,500			26,100
Payments on note payable, other	—			(1,239		)
Repurchase of common units	(1,293		)	—
Distributions to partners	(13,068		)	(13,068		)
Net cash (used in) provided by financing activities	(11,861		)	11,793

Increase in cash and cash equivalents	2,017			310
Cash and cash equivalents at beginning of period	945			2,110
Cash and cash equivalents at end of period	$	2,962		$	2,420

Supplemental information
Cash paid during the period for interest	$	7,289		$	10,320

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

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GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(In thousands)

(Unaudited)

										Accumulated
							General			Other			Total
	Common			Subordinated			Partner			Comprehensive			Partners’
	Unitholders			Unitholders			Interest			Loss			Equity

Balance at December 31, 2008	$	163,092		$	(4,189	)	$	(172	)	$	(15,263	)	$	143,468
Stock-based compensation	917			—			—			—			917
Phantom unit dividend	(8		)	—			—			—			(8		)
Distributions to partners	(7,242		)	(5,502		)	(324		)	—			(13,068		)
Repurchase of common units	(1,405		)	—			—			—			(1,405		)
Comprehensive income:
Net income	10,981			8,417			443			—			19,841
Other comprehensive income:
Change in fair value of interest rate collars	—			—			—			3,415			3,415
Change in pension liability	—			—			—			351			351
Total comprehensive income	—			—			—			—			23,607
Balance at June 30, 2009	$	166,335		$	(1,274	)	$	(53	)	$	(11,497	)	$	153,511

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

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Basis of Presentation

Organization

Global Partners LP (the “Partnership”) is a publicly traded master limited partnership that engages in the wholesale and commercial distribution of refined petroleum products and small amounts of natural gas and provides ancillary services to companies.

The Partnership has five operating subsidiaries: Global Companies LLC, its subsidiary, Glen Hes Corp., Global Montello Group Corp., Chelsea Sandwich LLC and Global Energy Marketing LLC (“Global Energy”) (the five operating subsidiaries, collectively, the “Companies”). The Companies (other than Glen Hes Corp.) are wholly owned by Global Operating LLC, a wholly owned subsidiary of the Partnership. Global Energy was recently formed to expand the Partnership’s natural gas operations. It is in the process of obtaining licensure and is not yet operational. In addition, GLP Finance Corp. (“GLP Finance”) is a wholly owned subsidiary of the Partnership. GLP Finance has no material assets or liabilities. Its activities will be limited to co-issuing debt securities and engaging in other activities incidental thereto.

The Partnership’s 1.73% general partner interest is held by Global GP LLC, the Partnership’s general partner (the “General Partner”). The General Partner, which is owned by affiliates of the Slifka family, manages the Partnership’s operations and activities and employs its officers and substantially all of its personnel. The General Partner and affiliates of the General Partner, including its directors and executive officers, own 142,799 common units and 5,642,424 subordinated units, representing a combined 43.5% limited partner interest.

Basis of Presentation

Interim Financial Statements

The accompanying consolidated financial statements as of June 30, 2009 and December 31, 2008 and for the three and six months ended June 30, 2009 and 2008 reflect the accounts of the Partnership. All intercompany balances and transactions have been eliminated.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition and operating results for the interim periods. The interim financial information, which has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), should be read in conjunction with the consolidated financial statements for the year ended December 31, 2008 and notes thereto contained in the Partnership’s Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2009.

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

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Organization and Basis of Presentation (continued)

The following table presents the Partnership’s products as a percentage of total sales for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2009		2008		2009		2008
Distillate sales	35	%	40	%	51	%	50	%
Gasoline sales	60	%	56	%	43	%	45	%
Residual oil sales	5	%	4	%	6	%	5	%
	100	%	100	%	100	%	100	%

The Partnership had one customer, ExxonMobil Oil Corporation (“ExxonMobil”), who accounted for approximately 25% and 23% of total sales for the three months ended June 30, 2009 and 2008, respectively and approximately 19% and 20% of total sales for the six months ended June 30, 2009 and 2008, respectively.

The consolidated balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.

Reclassifications

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation.

Note 2. Net Income (Loss) Per Limited Partner Unit

On January 1, 2009, the Partnership adopted Emerging Issues Task Force (“EITF”) Issue No. 07-04, “Application of the Two-Class Method under FASB Statement No. 128 to Master Limited Partnerships” (“EITF 07-04”) which specifies the treatment of earnings per unit calculations when incentive distributions rights (“IDRs”) exist in master limited partnerships. EITF 07-04 provides that net income for the current period is to be reduced by the amount of available cash that will be distributed with respect to that period for purposes of calculating net income per unit. Any residual amount representing undistributed net income (or losses) is assumed to be allocated to the ownership interests in accordance with the contractual provisions of the partnership agreement.

Under the Partnership’s partnership agreement, for any quarterly period, the IDRs participate in net income only to the extent of the amount of cash distributions actually declared, thereby excluding the IDRs from participating in the Partnership’s undistributed net income or losses. Accordingly, the Partnership’s undistributed net income is assumed to be allocated to the common and subordinated unitholders, or limited partners’ interest, and to the General Partner’s interest.

On April 22, 2009, the board of directors of the General Partner declared a quarterly cash distribution of $0.4875 per unit for the period from January 1, 2009 through March 31, 2009. On July 23, 2009, the board declared a quarterly cash distribution of $0.4875 per unit for the period from April 1, 2009 through June 30, 2009. These declared cash distributions resulted in incentive distributions to the General Partner, as the holder of the incentive distribution rights, as indicated above, and enabled the Partnership to reach its second target distribution with respect to such incentive distribution rights. See Note 9, “Cash Distributions” for further information.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Net Income (Loss) Per Limited Partner Unit (continued)

The following table provides a reconciliation of net income and the assumed allocation of net income to the limited partners’ interest for purposes of computing net income per limited partner unit for the three and six months ended June 30, 2009 (in thousands, except per unit data):

	Three months ended June 30, 2009
				Limited			General Partner Interest
				Partner			General
	Total			Interest			Partner			IDRs
Numerator:
Net income	$	978		$	911		$	67		$	—

Declared distribution	$	6,534		$	6,372		$	112		$	50
Assumed allocation of undistributed net income	(5,556		)	(5,461		)	(95		)	—
Assumed allocation of net income	$	978		$	911		$	17		$	50

Denominator:
Basic weighted average limited partner units outstanding				13,059
Dilutive effect of phantom units				297
Diluted weighted average limited partner units outstanding				13,356

Basic net income per limited partner unit				$	0.07
Diluted net income per limited partner unit				$	0.07

	Six months ended June 30, 2009
			Limited		General Partner Interest
			Partner		General
	Total		Interest		Partner		IDRs
Numerator:
Net income	$	19,841	$	19,398	$	443	$	—

Declared distribution	$	13,068	$	12,744	$	224	$	100
Assumed allocation of undistributed net income	6,773		6,654		119		—
Assumed allocation of net income	$	19,841	$	19,398	$	343	$	100

Denominator:
Basic weighted average limited partner units outstanding			13,065
Dilutive effect of phantom units			208
Diluted weighted average limited partner units outstanding			13,273

Basic net income per limited partner unit			$	1.48
Diluted net income per limited partner unit			$	1.46

At June 30, 2009, limited partner units outstanding excluded common units held on behalf of the Partnership pursuant to its Repurchase Program and for future satisfaction of the General Partner’s Obligations (as defined in Note 12). These units are not deemed outstanding for purposes of calculating net income per limited partner unit (basic and diluted).

The Partnership applied the provisions of EITF No. 07-04 on a retroactive basis which had an immaterial impact on the limited partners’ interest in net (loss) income and net (loss) income per limited partner unit for the three and six months ended June 30, 2008.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2. Net Income (Loss) Per Limited Partner Unit (continued)

The following table provides a reconciliation of net (loss) income and the assumed allocation of net (loss) income to the limited partners’ interest for purposes of computing net income per limited partner unit for the three and six months ended June 30, 2008 (in thousands, except per unit data):

	Three months ended June 30, 2008
				Limited			General Partner Interest
				Partner			General
	Total			Interest			Partner			IDRs
Numerator:
Net loss	$	(1,254	)	$	(1,282	)	$	28		$	—

Declared distribution	$	6,534		$	6,372		$	112		$	50
Assumed allocation of undistributed net loss	(7,788		)	(7,654		)	(134		)	—
Assumed allocation of net loss	$	(1,254	)	$	(1,282	)	$	(22	)	$	50

Denominator:
Basic weighted average limited partner units outstanding				13,071
Diluted weighted average limited partner units outstanding				13,071

Basic net loss per limited partner unit				$	(0.10	)
Diluted net loss per limited partner unit				$	(0.10	)

	Six months ended June 30, 2008
				Limited			General Partner Interest
				Partner			General
	Total			Interest			Partner			IDRs
Numerator:
Net income	$	7,365		$	7,138		$	227		$	—

Declared distribution	$	13,068		$	12,744		$	224		$	100
Assumed allocation of undistributed net income	(5,703		)	(5,606		)	(97		)	—
Assumed allocation of net income	$	7,365		$	7,138		$	127		$	100

Denominator:
Basic weighted average limited partner units outstanding				13,071
Diluted weighted average limited partner units outstanding				13,071

Basic net income per limited partner unit				$	0.55
Diluted net income per limited partner unit				$	0.55

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3. Comprehensive Income

The components of comprehensive income consisted of the following (in thousands):

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2009		2008			2009		2008
Net income (loss)	$	978	$	(1,254	)	$	19,841	$	7,365
Change in fair value of interest rate collars	2,263		2,280			3,415		(116		)
Change in pension liability	593		(217		)	351		(781		)
Total comprehensive income	$	3,834	$	809		$	23,607	$	6,468

Note 4. Inventories

The Partnership hedges substantially all of its inventory purchases through futures contracts and swap agreements. Hedges are executed when inventory 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, are recognized in earnings as an increase or decrease in cost of sales. All hedged inventory is valued using the lower of cost, as determined by specific identification, or market. Prior to sale, hedges are removed from specific barrels of inventory, and the then unhedged inventory is sold and accounted for on a first-in, first-out basis.

Inventories consisted of the following (in thousands):

	June 30, 2009		December 31, 2008
Distillates: home heating oil, diesel and kerosene	$	251,553	$	160,000
Residual oil	31,003		24,878
Gasoline	69,644		40,183
Blend stock	17,153		15,285
Total	$	369,353	$	240,346

In addition to its own inventory, the Partnership has exchange agreements with unrelated third-party suppliers, whereby it may draw inventory from these other suppliers and suppliers may draw inventory from the Partnership. Positive exchange balances are accounted for as accounts receivable and amounted to $21.8 million and $14.8 million at June 30, 2009 and December 31, 2008, respectively. Negative exchange balances are accounted for as accounts payable and amounted to $11.5 million and $8.4 million at June 30, 2009 and December 31, 2008, respectively. Exchange transactions are valued using current quoted market prices.

Note 5. Derivative Financial Instruments

Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”) establishes accounting and reporting standards for derivative instruments and hedging activities and requires that an entity recognize derivatives as either assets or liabilities on the balance sheet and measure the instruments at fair value. Changes in the fair value of the derivative are to be recognized currently in earnings, unless specific hedge accounting criteria are met.

Effective January 1, 2009, the Partnership adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (“SFAS No. 161”) which changes the disclosure requirements for derivative and hedging activities. SFAS No. 161 requires the Partnership to provide enhanced disclosures about (a) how and why the Partnership uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect the Partnership’s financial position, financial performance and cash flows.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Derivative Financial Instruments (continued)

The following table presents the volume of activity related to the Partnership’s derivative financial instruments at June 30, 2009:

	Units(1)			Unit of Measure
Oil Contracts
Long	8,779			Thousands of barrels
Short	(11,760		)	Thousands of barrels

Natural Gas Contracts
Long	19,962			Decatherms
Short	(19,962		)	Decatherms

Interest Rate Collars	$	200,000		Thousands of dollars

(1) Number of open positions and gross notional amounts do not quantify risk or represent assets or liabilities of the Partnership, but are used in the calculation of cash settlements under the contracts.

Fair Value Hedges

The fair value of the Partnership’s derivatives is determined through the use of independent markets and is based upon the prevailing market prices of such instruments at the date of valuation. The Partnership enters into futures contracts for the receipt or delivery of refined petroleum products in future periods. The contracts are entered into in the normal course of business to reduce risk of loss of inventory on hand, which could result through fluctuations in market prices. Changes in the fair value of these contracts, as well as the offsetting gain or loss on the hedged inventory item, are recognized in earnings as an increase or decrease in cost of sales. Ineffectiveness related to these hedging activities was immaterial at June 30, 2009.

The Partnership also uses futures contracts and swap agreements to hedge exposure under forward purchase and sale commitments. These agreements are intended to hedge the cost component of virtually all of the Partnership’s forward purchase and sale commitments. Changes in the fair value of these contracts, as well as offsetting gains or losses on the forward fixed price purchase and sale commitments, are recognized in earnings as an increase or decrease in cost of sales. Gains and losses on net product margin from forward fixed price purchase and sale contracts are reflected in earnings as an increase or decrease in cost of sales as these contracts mature. Ineffectiveness related to these hedging activities was immaterial at June 30, 2009.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Derivative Financial Instruments (continued)

The following table presents the gross fair values of the Partnership’s derivative instruments and firm commitments and their location in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008 (in thousands):

	Assets					Liabilities
		June 30,		December 31,			June 30,		December 31,
Derivatives Under	Balance Sheet	2009		2008		Balance Sheet	2009		2008
SFAS No. 133	Location	Fair Value		Fair Value		Location	Fair Value		Fair Value

Derivatives designated as hedging instruments and firm commitments

Oil product contracts(1)	(2)	$	60,311	$	215,237	(3)	$	68,762	$	57,506

Derivatives not designated as hedging instruments

Oil product contracts	Accrued expenses and other current liabilities	7,411		6,739		Accrued expenses and other current liabilities	7,491		6,799

Total derivatives		$	67,772	$	221,976		$	76,253	$	64,305

(1) Includes forward fixed price purchase and sale contracts as recognized in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008.

(2) Fair value of forward fixed price contracts, prepaid expenses and other current assets, accrued and other current liabilities and obligations on forward fixed price contracts

(3) Obligations on forward fixed price contracts and accrued expenses and other current liabilities

The following table presents the amount of gains and losses from derivatives involved in fair value hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

Amount of Gain (Loss)

Hedged

Location of

Amount of Gain (Loss)

Derivatives in

Location of

Recognized in Income

Items in

Gain (Loss)

Recognized in Income

SFAS No. 133

Gain (Loss)

on Derivatives

SFAS No. 133

Recognized in

on Hedged Items

Fair Value

Recognized in

Three Months Ended

Fair Value

Income on

Three Months Ended

Hedging

Income on

June 30,

Hedge

Related

June 30,

Relationship

Derivative

2009

2008

Relationships

Hedged Item

2009

2008

Oil product contracts

Cost of sales

(99,378

)

(85,417

)

Inventories and forward fixed price contracts

Cost of sales

99,699

85,741

Amount of Gain (Loss)

Hedged

Location of

Amount of Gain (Loss)

Derivatives in

Location of

Recognized in Income

Items in

Gain (Loss)

Recognized in Income

SFAS No. 133

Gain (Loss)

on Derivatives

SFAS No. 133

Recognized in

on Hedged Items

Fair Value

Recognized in

Six Months Ended

Fair Value

Income on

Six Months Ended

Hedging

Income on

June 30,

Hedge

Related

June 30,

Relationship

Derivative

2009

2008

Relationships

Hedged Item

2009

2008

Oil product contracts

Cost of sales

(199,602

)

(82,886

)

Inventories and forward fixed price contracts

Cost of sales

200,247

83,200

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Derivative Financial Instruments (continued)

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

The table below presents the composition and fair value of forward fixed price purchase and sale contracts on the Partnership’s consolidated balance sheet being hedged by the following derivative instruments (in thousands):

	June 30, 2009			December 31, 2008
Futures contracts, net	$	(2,642	)	$	138,741
Swaps and other, net	(3,060		)	15,092
Total	$	(5,702	)	$	153,833

The total balances of $(5.7 million) and $153.8 million reflect the fair value of the forward fixed price contract (liability)/asset net of the corresponding asset/(liability) on the accompanying consolidated balance sheets at June 30, 2009 and December 31, 2008, respectively.

The Partnership also markets and sells natural gas. The Partnership generally conducts business by entering into forward purchase commitments for natural gas only when it simultaneously enters into arrangements for the sale of product for physical delivery to third-party users. The Partnership generally takes delivery under its purchase commitments at the same location as it delivers to third-party users. Through these transactions, which establish an immediate margin, the Partnership seeks to maintain a position that is substantially balanced between firm forward purchase and sales commitments. Natural gas is generally purchased and sold at fixed prices and quantities. Current price quotes from actively traded markets are used in all cases to determine the contracts’ fair value. Changes in the fair value of these contracts are recognized in earnings as an increase or decrease in cost of sales.

The Partnership formally documents all relationships between hedging instruments and hedged items after its risk management objectives and strategy for undertaking the hedge are determined. The Partnership calculates hedge effectiveness on a quarterly basis. This process includes specific identification of the hedging instrument and the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness will be assessed. Both at the inception of the hedge and on an ongoing basis, the Partnership assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value of hedged items. The derivative instruments that qualify for hedge accounting are fair value hedges.

The Partnership has a daily margin requirement with its broker based on the prior day’s market results on open futures contracts. The required brokerage margin balance was $25.9 million and $9.0 million at June 30, 2009 and December 31, 2008, respectively.

The Partnership is exposed to credit loss in the event of nonperformance by counterparties of forward purchase and sale commitments, futures contracts, options and swap agreements, but the Partnership has no current reason to expect any material nonperformance by any of these counterparties. Futures contracts, the primary derivative instrument utilized by the Partnership, are traded on regulated exchanges, greatly reducing potential credit risks. The Partnership utilizes primarily one clearing broker, a major financial institution, for all New York Mercantile Exchange (“NYMEX”) derivative transactions and the right of offset exists. Accordingly, the fair value of all derivative instruments is presented on a net basis on the consolidated balance sheets. Exposure on forward purchase and sale commitments, swap and certain option agreements is limited to the amount of the recorded fair value as of the balance sheet dates.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Derivative Financial Instruments (continued)

Cash Flow Hedges

The Partnership links all hedges that are designated as cash flow hedges to forecasted transactions. To the extent such hedges are effective, the changes in the fair value of the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings.

The Partnership executed two zero premium interest rate collars with major financial institutions. Each collar is designated as a cash flow hedge and accounted for under the provisions of SFAS No. 133. The first collar, which became effective on May 14, 2007 and expires on May 14, 2011, is used to hedge the variability in interest payments due to changes in the three-month LIBOR rate with respect to $100.0 million of three-month LIBOR-based borrowings. Under the first collar, the Partnership capped its exposure at a maximum three-month LIBOR rate of 5.75% and established a minimum floor rate of 3.75%. As of June 30, 2009, the three-month LIBOR rate of 0.91% was lower than the floor rate. As a result, in August 2009, the Partnership will remit to the respective financial institution the difference between the floor rate and the current rate which amounted to approximately $379,000 and, at June 30, 2009, was recorded in accrued expenses and other current liabilities on the accompanying consolidated balance sheet. As of June 30, 2009, the fair value of the first collar was a liability of approximately $4.4 million and was recorded in both other long-term liabilities and accumulated other comprehensive income. Hedge effectiveness was assessed at inception and is assessed quarterly, prospectively and retrospectively. The changes in the fair value of the first collar are expected to be highly effective in offsetting the changes in interest rate payments attributable to fluctuations in the three-month LIBOR rate above and below the first collar’s strike rates. Ineffectiveness related to the first collar was immaterial at June 30, 2009.

On September 29, 2008, the Partnership executed its second zero premium interest rate collar. The second collar, which became effective on October 2, 2008 and expires on October 2, 2013, is used to hedge the variability in cash flows in monthly interest payments made on the Partnership’s $100.0 million one-month LIBOR-based borrowings (and subsequent refinancings thereof) due to changes in the one-month LIBOR rate. Under the second collar, the Partnership capped its exposure at a maximum one-month LIBOR rate of 5.50% and established a minimum floor rate of 2.70%. As of June 30, 2009, the one-month LIBOR rate of 0.32% was lower than the floor rate. As a result, in July 2009, the Partnership remitted to the respective financial institution the difference between the floor rate and the current rate which amounted to approximately $192,000 and, at June 30, 2009, was recorded in accrued expenses and other current liabilities on the accompanying consolidated balance sheet. As of June 30, 2009, the fair value of the second collar was a liability of approximately $3.0 million and was recorded in both other long-term liabilities and accumulated other comprehensive income in the accompanying consolidated balance sheet. Hedge effectiveness was assessed at inception and is assessed quarterly, prospectively and retrospectively, using the regression analysis. The changes in the fair value of the second collar are expected to be highly effective in offsetting the changes in interest rate payments attributable to fluctuations in the one-month LIBOR rate above and below the second collar’s strike rates. Ineffectiveness related to the second collar was immaterial at June 30, 2009.

The following table presents the fair value of the Partnership’s derivative instruments and their location in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008 (in thousands):

Assets

Liabilities

June 30,

December 31,

June 30,

December 31,

Derivatives Under

Balance Sheet

2009

2008

Balance Sheet

2009

2008

SFAS No. 133

Location

Fair Value

Location

Fair Value

Derivatives designated as hedging instruments

Interest rate collars

—

Other long-term liabilities

7,431

10,846

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5. Derivative Financial Instruments (continued)

The following table presents the amount of gains and losses from derivatives involved in cash flow hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

Recognized in Income

on Derivatives

Amount of Gain (Loss)

(Ineffectiveness Portion

Amount of Gain (Loss)

(Ineffectiveness Portion

Recognized in Other

and Amount Excluded

Recognized in Other

and Amount Excluded

Comprehensive Income

from Effectiveness

Comprehensive Income

from Effectiveness

Derivatives in

on Derivatives

Testing)

on Derivatives

Testing)

SFAS No. 133

Three Months Ended

Six Months Ended

Cash Flow

June 30,

Hedging Relationship

2009

2008

2009

2008

2009

2008

2009

2008

Interest rate collars

2,264

2,280

—

3,416

(116

)

—

Ineffectiveness related to the interest rate collars is recognized as interest expense and was immaterial at June 30, 2009. The effective portion related to the interest rate collars that was originally reported in other comprehensive income and reclassified to earnings was $1.3 million and $2.3 million for the three and six months ended June 30, 2009, respectively.

Derivatives Not Involved in a SFAS No. 133 Relationship

While the Partnership seeks to maintain a position that is substantially balanced within its product purchase activities, it may experience net unbalanced positions for short periods of time as a result of variances in daily sales and transportation and delivery schedules as well as logistical issues associated with inclement weather conditions. In connection with managing these positions and maintaining a constant presence in the marketplace, both necessary for its business, the Partnership engages in a controlled trading program for up to an aggregate of 250,000 barrels of refined petroleum products at any one point in time.

The following table presents the amount of gains and losses from derivatives not involved in a SFAS No. 133 hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

Amount of Gain (Loss)

Location of

Recognized in Income

Gain (Loss)

on Derivatives

Recognized in

Three Months Ended

Six Months Ended

Derivatives Not Designated as Hedging

Income on

June 30,

Instruments Under SFAS No. 133

Derivatives

2009

2008

2009

2008

Oil product contracts

Cost of sales

1,767

(1,051

)

5,752

4,503

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Debt

The Partnership has a senior secured credit agreement (the “Credit Agreement”) with total available commitments of $750.0 million. There are three facilities under the Credit Agreement:

· a working capital revolving credit facility to be used for working capital purposes and letters of credit in the principal amount equal to the lesser of the Partnership’s borrowing base and $650.0 million; the $650.0 million includes two $50.0 million seasonal overline facilities that are available each year only during the period between September 1 and June 30;

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

· a $15.0 million revolving credit facility to be used for general purposes, including payment of distributions to the Partnership’s unitholders.

In addition, the Credit Agreement has an accordion feature whereby the Partnership may request on the same terms and conditions of its then existing Credit Agreement, provided no Event of Default (as defined in the Credit Agreement) then exists, an increase to: (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 $200.0 million, for a total working capital revolving credit facility of up to $850.0 million. Any such request for an increase by the Partnership must be in a minimum amount of $5.0 million, and no more than three such requests may be made for each facility. The Partnership, however, cannot provide assurance that its lending group will agree to fund any request by the Partnership for additional amounts in excess of the total available commitments of $750.0 million.

Availability under the Partnership’s working capital revolving credit facility is subject to a borrowing base which is redetermined from time to time and based on specific advance rates on eligible current assets. Under the Credit Agreement, the Partnership can borrow only up to the level of its then current borrowing base. Availability under the Partnership’s borrowing base may be affected by events beyond the Partnership’s control, such as changes in refined petroleum product prices, collection cycles, counterparty performance, advance rates and limits and deteriorating economic conditions. These and other events could require the Partnership to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures. The Partnership can provide no assurance that such waivers, amendments or alternative financing could be obtained or, if obtained, would be on terms acceptable to the Partnership.

During the period from January 1, 2008 through July 20, 2008, borrowings under the Partnership’s working capital revolving credit, acquisition and revolving credit facilities bore interest at the Partnership’s option at (1) the Eurodollar rate, plus 1%, 1½% and 1½%, respectively, (2) the cost of funds rate, plus 1%, 1¾% and 1½%, respectively, or (3) the bank’s base rate.

Commencing July 21, 2008, borrowings under the working capital revolving credit facility bear interest at (1) the Eurodollar rate plus 1.75% to 2.25%, (2) the cost of funds rate plus 1.75% to 2.25%, or (3) the base rate plus 0.75% to 1.25%, each depending on the pricing level provided in the Credit Agreement, as amended, which in turn depends upon the Combined Interest Coverage Ratio (as such term is defined in the Credit Agreement). Commencing July 21, 2008, borrowings under the acquisition and revolving credit facilities bear interest at (1) the Eurodollar rate plus 2.25% to 2.75%, (2) the cost of funds rate plus 1.75% to 2.25%, or (3) the base rate plus 0.75% to 1.25%, each depending on the pricing level provided in the Credit Agreement, as amended, which in turn depends upon the Combined Interest Coverage Ratio. The average interest rate was approximately 3.8% for each of the three months ended June 30, 2009 and 2008. The average interest rates were approximately 3.8% and 4.2% for the six months ended June 30, 2009 and 2008, respectively.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Debt (continued)

In addition, the Partnership executed two zero premium interest rate collars with major financial institutions. The first collar, which became effective on May 14, 2007, is used to hedge the variability in interest payments due to changes in the three-month LIBOR rate with respect to $100.0 million of three-month LIBOR-based borrowings. The second collar, which became effective on October 2, 2008, is used to hedge the variability in cash flows in monthly interest payments made on the Partnership’s $100.0 million one-month LIBOR-based borrowings (and subsequent refinancings thereof) due to changes in the one-month LIBOR rate (see Note 5 for further discussion on the interest rate collars).

The Partnership incurs a letter of credit fee of 1.75% per annum for each letter of credit issued. In addition, the Partnership incurs a commitment fee on the unused portion of the three facilities under the Credit Agreement (including the unused portion of either of the seasonal overline facilities exercised by the Partnership) equal to 0.3% to 0.375% per annum, depending on the pricing level and the Combined Interest Coverage Ratio provided in the Credit Agreement. The Partnership also incurs a facility fee of 0.1% per annum on any unexercised seasonal overline facility during the period between September 1 and June 30 and a seasonal overline fee of $30,000 each time the Partnership elects to exercise either of the seasonal overline facilities.

The Credit Agreement will mature on April 22, 2011. The Partnership classifies a portion of its working capital revolving credit facility as a long-term liability because the Partnership has a multi-year, long-term commitment from its bank group. The long-term portion of the working capital revolving credit facility was $229.0 million and $154.1 million at June 30, 2009 and December 31, 2008, respectively, representing the amounts expected to be outstanding during the year. In addition, the Partnership classifies a portion of its working capital revolving credit facility as a current liability because it repays amounts outstanding and reborrows funds based on its working capital requirements. The current portion of the working capital revolving credit facility was approximately $135.8 million and $208.2 million at June 30, 2009 and December 31, 2008, respectively, representing the amounts the Partnership expects to pay down during the course of the year.

As of June 30, 2009, the Partnership had total borrowings outstanding under the Credit Agreement of $436.0 million, including $71.2 million outstanding on the acquisition facility. In addition, the Partnership had outstanding letters of credit of $54.0 million. The total remaining availability for borrowings and letters of credit at June 30, 2009 and December 31, 2008 was $260.0 million and $211.3 million, respectively.

The Credit Agreement is secured by substantially all of the assets of the Partnership and each of the Companies and is guaranteed by the General Partner. The Credit Agreement imposes certain requirements including, for example, a prohibition against distributions if any potential default or Event of Default (as defined in the Credit Agreement) would occur, and limitations on the Partnership’s ability to grant liens, make certain loans or investments, incur additional indebtedness or guarantee other indebtedness, make any material change to the nature of the Partnership’s business or undergo a fundamental change, make any material dispositions, acquire another company, enter into a merger, consolidation, sale leaseback transaction or purchase of assets, or make capital expenditures in excess of specified levels.

The Credit Agreement imposes financial covenants that require the Partnership to maintain certain minimum working capital amounts, capital expenditure limits, a minimum EBITDA ratio, a minimum combined interest coverage ratio and a maximum leverage ratio. The Partnership was in compliance with the foregoing covenants at June 30, 2009. The Credit Agreement also contains a representation whereby there can be no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement).

The Credit Agreement also requires that in each calendar year, the outstanding amount under the working capital revolving credit facility must be equal to or less than $263.0 million for a period of ten consecutive calendar days. The Partnership has complied with this provision for the year ending December 31, 2009.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6. Debt (continued)

The Credit Agreement limits distributions by the Partnership to its unitholders to the amount of the Partnership’s available cash and permits borrowings to fund such distributions only under the $15.0 million revolving credit facility. The revolving credit facility is subject to an annual “clean-down” period, requiring the Partnership to reduce the amount outstanding under the revolving credit facility to $0 for 30 consecutive calendar days in each calendar year. The Partnership has complied with this provision for the year ending December 31, 2009.

The lending group under the Credit Agreement includes the following institutions: Bank of America, N.A.; Standard Chartered Bank; JPMorgan Chase Bank, N.A.; Societe Generale; RBS Citizens, National Association; Sovereign Bank; Fortis Capital Corp.; Webster Bank National Association; KeyBank National Association; TD Bank, N.A. (f/k/a TD BankNorth, N.A.); Wells Fargo Bank, N.A.; Wachovia Bank, National Association; and Calyon New York Branch.

Note 7. Employee Benefit Plan with Related Party

The General Partner employs substantially all of the Partnership’s employees and charges the Partnership for their services. The Partnership also reimburses the General Partner for its contributions under the General Partner’s 401(k) Savings and Profit Sharing Plan and the General Partner’s qualified and non-qualified pension plans. The Partnership’s net periodic benefit cost for the defined benefit pension plan consisted of the following components (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
Service cost	$	325		$	266		$	650		$	531
Interest cost	228			200			457			400
Expected return on plan assets	(160		)	(165		)	(321		)	(330		)
Recognized net actuarial loss	48			—			96			—
Net periodic benefit cost	$	441		$	301		$	882		$	601

Note 8. Related Party Transactions

The Partnership is a party to a Second Amended and Restated Terminal Storage Rental and Throughput Agreement with Global Petroleum Corp. (“GPC”), an affiliate of the Partnership, which extends through December 2013 with annual renewal options thereafter. The agreement is accounted for as an operating lease. The expenses under this agreement totaled approximately $2.1 million for each of the three months ended June 30, 2009 and 2008 and approximately $4.2 million for each of the six months ended June 30, 2009 and 2008.

Pursuant to an Amended and Restated Services Agreement with GPC, GPC provides certain terminal operating management services to the Partnership and uses certain administrative, accounting and information processing services of the Partnership. The expenses from these services totaled approximately $15,000 and $21,500 for the three months ended June 30, 2009 and 2008, respectively, and approximately $36,500 and $43,000 for the six months ended June 30, 2009 and 2008, respectively. These charges were recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations. The agreement is for an indefinite term, and either party may terminate its receipt of some or all of the services thereunder upon 180 days’ notice at any time after January 1, 2009. As of June 30, 2009, no such notice of termination was given by either party.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8. Related Party Transactions (continued)

Pursuant to the Partnership’s Amended and Restated Services Agreement with Alliance Energy LLC (formerly known as Alliance Energy Corp.) (“Alliance”), the Partnership also provides certain administrative, accounting and information processing services, and the use of certain facilities, to Alliance, an affiliate of the Partnership that is wholly owned by AE Holdings Corp., which is approximately 95% owned by members of the Slifka family. The income from these services was approximately $78,800 and $216,500 for the three months ended June 30, 2009 and 2008, respectively, and $191,000 and $433,000 for the six months ended June 30, 2009 and 2008, respectively. These fees were recorded as an offset to selling, general and administrative expenses in the accompanying consolidated statements of operations. The agreement extends through January 1, 2010.

The Partnership sells refined petroleum products to Alliance at prevailing market prices at the time of delivery. Sales to Alliance were approximately $3.9 million and $13.6 million for the three months ended June 30, 2009 and 2008, respectively, and $6.6 million and $19.4 million for the six months ended June 30, 2009 and 2008, respectively.

The General Partner employs substantially all of the Partnership’s employees and charges the Partnership for their services. The expenses for the three months ended June 30, 2009 and 2008, including payroll, payroll taxes and bonus accruals, were $7.6 million and $6.7 million, respectively, and $19.9 million and $14.4 million for the six months ended June 30, 2009 and 2008, respectively. The Partnership also reimburses the General Partner for its contributions under the General Partner’s 401(k) Savings and Profit Sharing Plan and the General Partner’s qualified and non-qualified pension plans.

The table below presents trade receivables with Alliance, receivables incurred in connection with the services agreements between Alliance and the Partnership and GPC and the Partnership, as the case may be, and receivables from the General Partner (in thousands):

	June 30, 2009		December 31, 2008
Receivables from Alliance	$	446	$	383
Receivables from GPC	222		325
Receivables from the General Partner (1)	403		1,810
Total	$	1,071	$	2,518

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

Note 9. Cash Distributions

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

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

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9. Cash Distributions (continued)

The Partnership will make distributions of available cash from operating surplus for any quarter during the subordination period as defined in its partnership agreement in the following manner: firstly, 98.27% to the common unitholders, pro rata, and 1.73% to the General Partner, until the Partnership distributes for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; secondly, 98.27% to the common unitholders, pro rata, and 1.73% to the General Partner, until the Partnership distributes for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; thirdly, 98.27% to the subordinated unitholders, pro rata, and 1.73% to the General Partner, until the Partnership distributes for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and thereafter, cash in excess of the minimum quarterly distributions is distributed to the unitholders and the General Partner, as the holder of the incentive distribution rights, based on the percentages as provided below.

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

	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 Partnership paid the following cash distribution during 2009 (in thousands, except per unit data):

Cash Distribution Payment Date	Per Unit Cash Distribution		Common Units		Subordinated Units		General Partner		Incentive Distribution		Total Cash Distribution

02/13/09(1)	$	0.4875	$	3,621	$	2,751	$	112	$	50	$	6,534
05/15/09(2)	$	0.4875	$	3,621	$	2,751	$	112	$	50	$	6,534

(1) This distribution of $0.4875 per unit resulted in the Partnership reaching its second target distribution for the fourth quarter of 2008. As a result, the General Partner, as the holder of the IDRs, received this additional incentive distribution.

(2) This distribution of $0.4875 per unit resulted in the Partnership reaching its second target distribution for the first quarter of 2009. As a result, the General Partner, as the holder of the IDRs received this additional incentive distribution.

In addition, on July 23, 2009, the board of directors of the General Partner declared a quarterly cash distribution of $0.4875 per unit for the period from April 1, 2009 through June 30, 2009 ($1.95 per unit on an annualized basis). On August 14, 2009, the Partnership will pay this cash distribution to its common and subordinated unitholders of record as of the close of business August 5, 2009. This distribution will result in the Partnership reaching its second target distribution for the quarter ended June 30, 2009.

Note 10. Segment Reporting

The Partnership is a wholesale and commercial distributor of gasoline, distillates and residual oil whose business is organized within two operating segments, Wholesale and Commercial, based on the way the chief operating decision maker (CEO) manages the business and on the similarity of customers and expected long-term financial performance of each segment. The accounting policies of the segments are the same as those described in Note 2, “Summary of Significant Accounting Policies,” in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10. Segment Reporting (continued)

In the Wholesale segment, the Partnership sells gasoline, home heating oil, diesel, kerosene and residual oil to unbranded retail gasoline stations and other resellers of transportation fuels, home heating oil retailers and wholesale distributors. Generally, customers use their own vehicles or contract carriers to take delivery of the product at bulk terminals and inland storage facilities that the Partnership owns or controls or with which it has throughput arrangements.

The Commercial segment includes (1) sales and deliveries of unbranded gasoline, home heating oil, diesel, kerosene, residual oil and small amounts of natural gas to customers in the public sector and to large commercial and industrial customers, either through a competitive bidding process or through contracts of various terms, and (2) sales of custom blended distillates and residual oil delivered by barges or from a terminal dock. Commercial segment customers include federal and state agencies, municipalities, large industrial companies, many autonomous authorities such as transportation authorities and water resource authorities, colleges and universities and a limited group of small utilities. Unlike the Wholesale segment, in the Commercial segment, the Partnership generally arranges the delivery of the product to the customer’s designated location, typically hiring third-party common carriers to deliver the product.

The Partnership evaluates segment performance based on net product margins before allocations of 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 reasonably possible for the Partnership to allocate the components of operating costs and expenses between the reportable segments. Additionally, due to the commingled nature and uses of the Partnership’s assets, it is not reasonably possible for the Partnership to allocate assets between the two segments. There were no intersegment sales for any of the periods presented below.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2009		2008		2009		2008
Wholesale Segment:
Sales
Distillates	$	405,060	$	883,577	$	1,411,676	$	2,486,987
Gasoline	720,330		1,283,676		1,221,989		2,258,744
Residual oil	5,853		25,220		17,343		43,577
Total	$	1,131,243	$	2,192,473	$	2,651,008	$	4,789,308
Net product margin (1)
Distillates	$	13,477	$	9,329	$	47,330	$	32,421
Gasoline	12,127		10,424		23,913		18,968
Residual oil	2,294		3,234		5,114		7,130
Total	$	27,898	$	22,987	$	76,357	$	58,519
Commercial Segment:
Sales	$	69,906	$	105,236	$	183,096	$	229,393
Net product margin (1)	$	2,596	$	2,323	$	7,524	$	4,929
Combined sales and net product margin:
Sales	$	1,201,149	$	2,297,709	$	2,834,104	$	5,018,701
Net product margin (1)	$