Global Partners LP (GLP) Q4 2016 Earnings Report, Transcript and Summary

Good day everyone and welcome to the Global Partners Fourth Quarter 2016 Financial Results Conference Call. [Operator Instructions] With us from Global Partners are President and Chief Executive Officer Mr. Eric Slifka; Chief Financial Officer, Ms. Daphne Foster; Chief Operating Officer, Mr. Mark Romaine; Executive Vice President and Chief Accounting Officer, Mr. Charles Rudinsky; and Executive Vice President and General Counsel, Mr. Edward Faneuil. At this time, I like to turn the call over to Mr. Faneuil for opening remarks. Please go ahead, sir.

Good morning. Thank you for joining us today. Before we begin, let me remind everyone that this morning we will be making forward-looking statements within the meaning of federal securities laws. These statements may include, but are not limited to, projections, beliefs, goals and estimates concerning the future financial and operational performance of Global Partners. Estimates for Global Partners' EBITDA guidance and future performance are based on assumptions regarding market conditions, such as the crude oil market; business cycles; demand for petroleum products; renewable fuels; and logistics; weather; credit markets; the regulatory and permitting environment; and the forward product pricing curve, which could influence quarterly financial results. We believe these assumptions are reasonable, given currently available information and our assessment of historical trends. Because our assumptions and future performance are subject to a wide range of business risks and uncertainties, we can provide no assurance that actual performance will fall within guidance ranges. In addition, such performance is subject to risk factors, including, but not limited to, those described in our filings with the Securities and Exchange Commission. Global Partners undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements that may be made during today's conference call. With Regulation FD in effect, it is our policy that any material comments concerning future results of operations will be communicated through news release, publicly announced conference calls, or other means that will constitute public disclosure for purposes of Regulation FD. Now please allow me to turn the call over to our President and Chief Executive Officer, Eric Slifka.

Thank you, Edward. Good morning, everyone and thank you joining us. During 2016, we successfully positioned Global for growth and profitability by executing on the strategic actions outlined to you on our Q4 call a year ago. You may remember, we specifically identified high fixed costs brought on by underutilized railcars in our crude oil business. As discussed on that call, our goals were to ensure a sound balance sheet with ample liquidity and generate sufficient cash flow to cover distributions and capital expenditures without relying on outside sources of capital. To achieve these goals, our 2016 plan included cutting expenses accelerating an asset sale program across our portfolio concentrated on non-strategic assets, and at the same time focusing efforts on businesses that provide the highest returns. Our successful execution of this plan in 2016 and continuing in 2017 has provided global with increased flexibility to invest in assets that are fundamental to growth objectives for our retail, wholesale, and commercial lines of business. Let me review some of our accomplishments in 2016. We completed the sale and lease back of 30 gasoline stations and convenience stores, enabling us to unlock the value of this steal in real estate. We fuel 30 nonstrategic gasoline stations and convenience stores from Mirabito Holdings, a transaction in which we also executed long-term supply contracts for petroleum products. In addition, we made significant progress during the year in selling non-strategic retail sites in the Northeast and mid-Atlantic through the end of 2016, approximately 70% of those NRC listed sites have been sold or are under agreement. In total, the sale lease back, the Mirabito transaction, and the disposition of sites in 2016 generated approximately 136 million in gross proceeds to Global. In addition, to the divestiture of non-strategic locations, we also have added higher return assets to our retail deck where we saw the opportunity to leverage our scale, and experience in view of fuel distribution, and C-store merchandising. In April, we expanded our retail network in Western Massachusetts, signing a long-term lease agreement for 22 gas stations and C-stores. In December, we signed an agreement to voluntarily terminate a sublease for 1,610 railcars from a third party. As part of that agreement, we made a one-time discounted lease termination payment. The key takeaway of that payment agreement is the determination of the lease, three years ahead of its scheduled expirations saving the partnership 10.2 million in cash and putting a significant portion of the expenses associated with the underutilized railcars behind us. We continually evaluate assets and seek ways to improve the performance of our business. Monetizing non-strategic assets remains an important focus for Global. Last month, we completed the sale of our natural gas marketing and electricity brokerage business for approximately 17.3 million. In February, we engaged a financial adviser to solicit proposals for the potential sale of six refined petroleum product terminals located in New England, New York, and Pennsylvania. The assets consist of terminals that represent approximately 1.1 million barrels of aggregate shell storage capacity. The core elements of our business, terminaling, marketing, and retail are fundamentally strong. Looking ahead, we continue to look for opportunities to acquire additional retail and wholesale businesses and evaluate terminal assets as they become available. On the West Coast, we are working to finalize permits needed to expand that facility to drive additional values. In summary, our plan last year was to position Global for growth and profitability and we executed on that plan. We solidified our balance sheet, improved our capital structure, and increased flexibility to strategically invest in assets. Before turning the call over to Daphne for a financial review, let me mention that in January the Board of Directors announced a quarterly cash distribution of $0.4625 per unit, or $1.85 on an on an annual basis. The distribution was paid on February 2014 to unit holders of record, as of the close of business on February 9, 2017. With that, let me turn the call over to Daphne.

Thank you Eric, and good morning everyone. As Eric noted, in December we signed an agreement to voluntarily terminate early a sublease with a counterparty for 1,610 railcars that were underutilized due to unfavorable market conditions in the crude by rail market. Separately, we entered into a fleet management services agreement, effective January 1, 2017 with the counterparty, pursuant to which we will provide them with the railcar storage, freight, cleaning and other services. As a result of the sublease termination, we recognize the least exit expense of 80.7 million in the fourth quarter of 2016, which consisted of 61.7 million cash consideration in settlement of the remaining lease payments, 10.7 million of cost for railcar storage, freight, cleaning, insurance, and other services; and 8.3 million in non-cash accounting adjustments. The payment of 61.7 million represents a discount of approximately 10.2 million in railcar lease payments that Global would have been obligated to pay over the next three years. The termination of the sublease eliminates future lease payments related to these railcars of approximately 30 million, 29 million and 13 million in 2017, 2018, and 2019, respectively. In connection with the sublease termination, we executed an amendment to our credit agreement that permitted the use of borrowings to make the early termination payments. The amendment also accelerates the step-down in the combined total leverage ratio from 5.5 times to 5 times effective with the quarter ended December 31, 2016. Now let me review our fourth quarter and full-year 2016 results, and provide our EBITDA guidance for 2017. Combined product margin in the fourth quarter increased 18.5 million or 12% year-over-year to 175.9 million. The increase was driven by strong performance across the wholesale segment and growth in our commercial segment, which was up 64%, due primarily to colder weather. Rising wholesale gasoline prices, as well as the sale of sites contributed to a 9.6 million product margin decline in the GDSO segment. The combination of growth in the wholesale and commercial segments more than offset the decline in the GDSO segment. Total expenses decreased 1.9 million year-over-year excluding the loss in asset sales and disposition of assets and the lease termination expense. SG&A expenses in Q4 increased approximately 1 million to 41.3 million. Operating expenses increased 2.3 million or 3% to 69.8 million, largely due to declines at our North Dakota and Oregon facilities, reflecting lower volume and reduce debt. The decrease was partially offset by higher expenses associated with our GDSO segment, including rent and various other expenses related to the addition of leased sites. Fourth quarter 2016 adjusted EBITDA when further adjusted for the lease termination expense increased by 19.7 million to 66.3 million from the same period a year earlier. As a result of the higher combined product margin and lower expenses. Interest expense decreased 1.1 million to 21.1 million. The decrease is primarily due to lower average balances on our revolving credit facility for the fourth quarter of 2016, compared with the same period in 2015. Those lower balances reflect use of proceeds from asset sales, including the sale-leaseback transaction to pay down debt offset by the railcar lease termination payment. Excluding the one-time railcar lease termination expenses and net loss in sale and disposition of assets, distributable cash flow would have been $35.4 million, compared with $18.1 million for the same period in 2015. While DCF is defined by our partnership agreement does not permit adjustment for certain non-cash charges, we believe that adding back these non-cash charges, as well as the lease termination expense more accurately reflects the partnership cash flow from normal operations. For the full year, excluding the lease termination expense, net loss on sale and disposition of assets and the goodwill and long-lived asset impairment DCF would have been 93.9 million, while distribution coverage was negative on a trailing 12-month basis. Distribution coverage after these adjustments would have been 1.48 times. Let me take you through our segments in more detail beginning with GDSO. Comparing Q4 2016 with the same period in 2015, product margin was down 9.6 million in the 111.7 million. This reduction reflects rising wholesale gasoline prices and the sale of sites, partly offset by the addition of leased sites to our portfolio. The gasoline distribution portion of the GDSO segment was down 4.7 million in the quarter to 68.9 million and station operations product margin decreased 4.9 million to 42.8 million. Wholesale segment product margin increased 25.1 million to 56.8 million in the fourth quarter of 2016. Crude oil product margin was 15.7 million in the quarter, compared with 6.4 million in the fourth quarter of 2015, primarily due to increased revenue from a crude take or pay contract, which more than offset lower sales activity. The decline in activity reflects continuing tight crude differentials. Wholesale gasoline and gasoline blendstock product margin increased 7.9 million to 19.2 million, primarily reflecting more favorable market conditions. Other oils and related products, which include distillates and residual fuel also benefited from favorable market conditions, including weather that was 25% colder than last year, resulting in a $7.9 million increase in product margins to 21.8 million. Commercial segment product margin increased 2.9 million or 64% to 7.4 million from the fourth quarter of 2015, primarily due to colder weather. Total volume for the fourth quarter of 2016 was down about 31 million gallons to 1.3 billion. Increases in GDSO and commercial volume were offset by 92 million decrease in wholesale volume, due primarily to the weak crude oil market. CapEx in the quarter was approximately 16.5 million, including 4.4 million in expansion CapEx and 12.1 million in maintenance CapEx. Expansion CapEx consisted of approximately 3.4 million in investments in our gas station business with much of the remaining funds used in IT-related projects. Maintenance CapEx included 10.2 million related to our retail sites. Now let me provide you some color on our full-year 2016 performance. Product margin in our GDSO segment increased approximately 17.8 million or 4% from full-year 2015, driven primarily by a full year of Capitol petroleum and the addition of the O'Connell and Getty leased sites, partially offset by the sale of non-strategic sites. Volume increased to 72 million gallons to 1.6 billion and fuel margin increased 12.6 million to 289.4 million for the same reasons. Product margin to station operations grew 5.2 million or 3% to 183.7 million, primarily due to a full-year of rental income from the Capitol Petroleum site. In contrast, wholesale segment product margin declined 63 million to 144.9 million, due primarily to tight crude differentials as mid-continent crude did not discount sufficiently to make rail transport to the East Coast competitive with imports. Crude oil product margin declined 87.3 million to negative 13.1 million, which includes 45.7 million in fixed cost associated with the railcar lease expenses. With the early lease termination in December, we have approximately 800 crude oil railcars remaining under our lease. We estimate the lease expense for these cars will be approximately 12 million in 2017, 6 million in 2018, and 2 million in 2019, after which the leases expire. Product margin from gasoline and gasoline blendstocks of 83.7 million was up 27% from full year 2015, reflecting favorable market conditions for wholesale gasoline and gasoline blendstocks, as well as higher volumes through our terminals. The margin from other oils and related products, including distillates increased by 10% or 6.6 million to 74.3 million, due primarily to more favorable market conditions and distillates. The decline in crude oil product margin more than offset growth in other parts of our business resulting in $50.4 million decline in combined product margin in 2016 to $642.1 million. SG&A expenses decreased 27.3 million or 15% to 149.7 million, due to decreases of 12.9 million in professional fees, and due diligence expenses, 8 million in wages and benefits, and 11.2 million in 2015 acquisition costs related to Warren and Capitol, partly offset by increases including severance charges related to the reduction in our workforce. Operating expenses declined 1.8 million to 288.5 million with more than 10 million in decreases across our terminal networks, including lower wages and benefits, partially offset by the addition of leased sites in our GDSO segment, and a full year of capital. Interest expense of 86.3 million includes 11.8 million associated with the financing obligations recognized in connection with the acquisition of Capitol, and the sale-leaseback transactions, and a $1.8 million write-off associated with a portion of the deferred financing fees when we reduced our credit facility in early 2016. Adjusting for the net loss in sale and disposition of assets, non-cash impairment charges and the lease exit and termination expense, full-year 2016 EBITDA would have been 210.4 million. Turning to CapEx maintenance CapEx was approximately 33 million for 2016 of which more than 25 million was less investments in the larger portfolio of retail sites in our GDSO segment. Expansion CapEx totaled 38.3 million for the year with 25.4 million in raze and rebuilds, expansion and improvements at our retail gasoline station and new to industry sites, including 5.7 million related to the addition of the 22 O'Connell sites. We invested approximately 7.9 million in terminal assets, including 7.5 million in dock and infrastructure expansion at our Oregon facility and approximately 5 million in other expansion projects, including IT. We currently expect 2017 maintenance CapEx of approximately 35 million to 45 million and expansion CapEx of approximately 25 million to 35 million in 2017, relating primarily to investments in our gas station business. Turning to our balance sheet, as of December 31, 2016 the partnership had total borrowings of 641.3 million under our $1.475 billion facility. Borrowings consisted of 216.7 million, under our 575 million revolving credit facility, and 424.6 million under our 900 million working capital facility. Our leverage as defined in our credit agreement was 4.3 times at the end of the quarter. As we have said on prior calls, our goal is to maintain a strong balance sheet with ample liquidity and we target long-term leverage of four times or lower we are pleased with the progress we have made on that front of this year. At the end of the first quarter last year, leverage was 4.6 times with borrowings under our revolver of 275 million. With proceeds from asset sales and the sale lease back, we reduced outstanding approximately 58 million to 216.7 million and financed the 61.7 million early lease termination payment. In 2016, we sold more than 75 sites, excluding the 30 sale leaseback sites and as of 12/31/2016 we had more than 40 sites held for sale and so expect incremental proceeds from sales in the next few quarters. In addition, we received more than 16 million in cash proceeds from the sale of our natural gas business, which closed in February. Our actions have positioned us to invest in our business, pursue opportunities and move closer to our long-term leverage target. For the full year 2017, we expect to generate EBITDA in the range of 190 million to 220 million, which guidance excludes the gain or loss on the sale and disposition of assets, and any impairment charges. Now we're happy to take your questions. Operator.

Thank you. [Operator Instructions] Our first question comes from the line of Barrett Blaschke with MUFG Securities. Please proceed with your question.

Hi guys. With the rail lease payment behind you, and that done, could you give us your long-term outlook for the rail business out of the Bakken?

Hi, good morning Barrett, it’s Mark. I think when we look forward at the rail opportunities out of the Bakken, I think we are planning for very little activity, I mean you have got the development of large pipeline capacity to move incremental barrels out of that region into the midcontinent and down into the Gulf, so it is likely that the rail opportunities will be limited. So when we look forward we plan for the worst, but we will be prepared to execute on opportunities as they arise. We still have crude capabilities in Albany and on the West Coast. So is that market change, we will be positioned to execute accordingly.

And actually a nice segue there. On the West Coast expansion, could you give us a little more color around that?

Sure. We have been working towards as we’ve talked about before, we’ve been working towards expansion plans on the West Coast that would allow us to increase the amount of storage, the number of rail offloading sports, and the pipeline capabilities so that we can handle segregated products. At the moment, we are evaluating opportunities with customers and counterparties, and so when we have the right opportunity we will look forward to move on those expansion opportunities.

Okay. And then one last one, if I can, which is just - you guys were talking about how the terminaling business has gotten stronger. What's the motivation behind selling these six? Are they just non-core, or what's the logic on running a process on six of the terminals?

I mean, basically we feel they are non-strategic to our business and frankly we will take a look at what sort of values we get and then we will decide if we are better off keeping them or we are better off selling them. I think this is all, the same kind of process as we are doing with the gas stations right. You evaluate and you can get a higher better utilization out of it in a different form, that’s the way we will move forward with it.

Okay, thank you.

Our next question comes from the line of Ben Brownlow with Raymond James. Please proceed with your question.

Hi good morning guys. Thanks for taking the question. Just to follow up, or get a little deeper on the crude oil product margin, how should we think about that product margin for 2017, just given the 12 million lease expense and the take-or-pay contracts that you may still have coming through?

Hi good morning, it’s Daphne. We don't give specific guidance for specific product margins. Obviously there is an uplift of 30 million or so a year-over-year in terms of the railcar lease or absent thereof or reduction if you well in 2017 versus 2016. I think, certainly 2016 reflects not only the larger lease expense, but some volume activity, as well as some contribution from our take or pay contract. We have got another year or so in that contract that are matures in mid-2018. So, we expect continued revenues from that contract, but certainly lower lease expense.

So as another way to phrase it out, when you think about the fourth-quarter run rate, when you back out - I think it was around $19 million of accrued income that ran through that fourth quarter, if that - if you back that out, and you are kind of at a $5 million quarterly loss run rate, is that a fair run rate? And then sort of - or is that fair, kind of $5 million loss run rate before that lease expense was cut?

Yes, I think that’s a hard one to actually pin - I don't necessarily want to provide guidance specifically on that product margin. I think that the overall guidance that we’ve given is the way I would look at it and go to the 190 to 220 versus the 210 we came in today.

Okay. And just to confirm, there was $19 million in the fourth quarter? Was that correct? Of accrued income and net product margin?

It was actually more than 19 million in the fourth quarter. We stood at the end of the third quarter and we said that year-to-date the take or pay contribution related to absence of nominations was about 19 million and the second and third quarter it was about 8 million each, they had another 8 million, and you guess it was about 28 million in terms of revenue in the fourth quarter related to that contract.

Okay, that's helpful. Thank you. And just one last one for me - on the GDSO segment, can you give us the site count of company-operated locations at quarter end? And how do you think about - we've seen some of your peers dealerizing company-operated locations, just to improve that cash flow stability. How do you think about that, and where do you see the ultimate mix going over the next 12 to 24 months?

I can give you the site count. At the end of the year and into the quarter we had 248 company operated sites.

Ben, this is Mark. So with respect to the second part of your question as far as the operating model for the sites I think at the moment we have a few different operating models. We’ve got company-operated sites, we've got dealer lease sites, and then we've got commission agent sites, and we have the balance that we have today, I think is the balance that fits us well, We will look at every site individually as we always have and will continue to do to determine what the best operating model for that site is. If we have we feel that we can add value or extract value from a company-operated model we will certainly pursue that. If we think that was better off in the hands of dealer commission agents then we will expand I that as well. So, I don't think that we have a specific mix that we are targeting. It really boils down to what is the best operating model for a particular site and certainly as we build some newer sites in the marketplace, I would expect those are likely going to be company operated stores, but it’s one of those things that we will look at site-by-site.

That makes sense. Thank you for the color.

Our next question comes from Gabe Moreen with Bank of America. Please proceed with your question.

Hi good morning everyone. Just a quick question in terms of this fantastic weather we've been having so far in the first quarter and how that is playing into guidance or not. Is it safe to assume that lower end of the range may factor in some of that fantastic weather, so quote-unquote?

Good morning Gabe. Yes the guidance that we're putting on today does reflect the warm weather we are seeing thus far.

Okay. So in other words, even the lower end of that range - sorry, the upper end of that range has some warm weather in it, too, Daphne? Is that fair?

Are you trying to get me to one end or the other.

Well, you know, look, I'm just trying to see what's in it. Because just saying warm weather kind of factored in throughout the range or just - okay.

Another way I look at it is, I mean I can give you another way of think about our guidance for this year. We came in with all the adjustments at 210 or so for 2016 and we talked about the 30 million in lower lease expense in 2017 versus 2016, wholesale gasoline and gasoline blendstocks if you look at that product margin it was a better year, $83 million or $84 million which is about $18 million more than last year. But that’s something to point to it and adjustment if you will, relative to 2016 and then you have warmer weather. So that’s how you get to the band between 119 and 220.

Okay, perfect. Thanks, Daphne. And then I know in the past you've said that RINs really don't matter that much. But given what's happening in DC, and I think the extreme fluctuation in the price of RINs, I just want to reconfirm that RINs really isn't something you are watching very closely, given your business.

Yes Gabe it’s Mark. RINs as we have described in the past have been a passthrough for us and I know there has been - certainly there is been a lot of volatility in the market and we are generally insulated from that. I think the other thing hanging out there is the potential shift in point of obligation and without knowing exactly what the mechanics will look like for that because there has been a lot of information around that, but imagining what we can, what that might look like, we would not expect to shift in the point of obligation to have a material impact on us.

Thanks, Mark. And then last question for me, I know you do give guidance on long-term leverage targets. Can you talk also maybe a little bit about long-term targets on distribution coverage, particularly since it seems like you will hopefully be getting to those long-term leverage targets sooner rather than later?

So what’s the question Gabe there?

Just in terms of just cash distribution coverage, if the trailing 12 months at approximately 1.4-ish coverage, whether you are comfortable with that level, Eric, or whether you think you can run lower than that, et cetera, et cetera.

I mean, the board always reviews what our distribution is on our quarter-on-quarter basis. I think that is going to just continue Gabe, sorry that’s not much of an answer but I don't know what else to say.

No. Figured I would try. Thanks, Eric.

Our next question comes from the line of Lin Shen with HITE. Please proceed with your question.

Good morning, appreciate taking my question. I just wanted to, first of all, clarify that the guidance you are giving for 2017 still includes the terminal asset you plan to sell.

Yes it does.

Okay. And also, for the asset sale; so Eric, what kind of like EBITDA multiple do you expect to get to think that a good value?

Well, I don't - I only know when offers come in and we will analyze it and obviously the hurdle rate is going to be, is am I better off selling it then keeping it right, and so the cash got more value in my pocket as opposed to hanging out there on that asset, right. And various types of assets, so you just won't know until you see the level of interest that you have, there is really a group of different types of assets that may fit somebody who has a particular situation. I mean, I remember when we were a very small company and we would look at an asset differently than anyone else, right and that’s what made us and allowed us to really grow the business, right for someone else may just have a different view and a different reason and different synergies and we may ever be able to create around that asset right so, that’s why we’re going through the process to sort of test the market to see what this that is not there.

And also the main reason - is there a reason you want to sell the asset is you're under the pressure to reduce debt, to delever?

No, I think this is literally just - we're going to test the market, see if we can make some hurdle rates and if we can, then we will look to move forward, but it is not about reduction, it is really the opposite of that, I think it’s actually being on the offense, actually not on the defense.

Great. Okay, thank you. I think James is also on the phone.

Hi, Eric. It was just a little bit, it was not something that we had expected to see in the press release, oh my god they are selling pieces of the core. That was my first reaction.

Don't look at it like that. There is no difference between what we did with our gas stations and what we're doing with our terminals. Right, so I mean this is literally we’re being strong in the way that we are attacking this really. It is not our weakness in any great shape or form, I don't have to sell anything, it’s sort of the process doesn't go the way that we hope that is fine, we may have one or two sites that may have more value as real stay, if there is a development then we will work through that, it’s just maximizing value, that’s all it is.

Is this about the tenth of your capacity or a little bit less?

If you look at it as a percentage of total capacity, yes.

Okay.

But the important metrics is always EBITDA returns that you have on individual assets.

Yes. We sort of thought of your business perhaps mistakenly that it is in the terminaling, building of market share, controlling acids is really, really important and let them go to potential competitors might not be a good thing but I guess these assets…?

Well obviously were thoughtful or so.

Next on the expansion CapEx and the gasoline business that you talked about, what is that likely to be?

On the expansion CapEx?

Yes.

Well the 25 million to 35 million that we are guiding today for expansion CapEx in 2017 is going to largely be in the retail business and it will be raze and rebuilds and some NCI work and some image enhancement rebranding, maybe some co-branding so those sorts of investments that we have done historically.

So there is not a thought of acquisition here?

There is no acquisition and the acquisition in the 25 million to 35 million that I gave.

But I mean, if you look I think, the whole point here is that the company is in a position where we can do deals, alright. We are going to look for transactions and we're going to try and grow the business and whether that’s acquiring other terminals whether that’s investing in retail business through NTIs or whether that’s acquiring other companies. I would say the availability that the company had to go out and do transactions now, I mean we are in a good spot to go grow the company.

Great. Well that’s great to hear then. I just got a couple of couple more. I noticed in the press release there was this long polemic about your inability to forecast net income and some other measures, what drove you to put that in there at this time?

Because it is the requirement when you give guidance or forward guidance of a non-GAAP measure that if without unusual effort if you can also provide a GAAP measure then you have GAAP measures that any do so.

Oh I see. Okay. And then lastly, I will get one more go at it. The guidance is 192 to 220, what would the guidance have then had weather been normal so far?

That is an interesting question. Basically the 190 to 220 does cover the weather and that’s, I guess all like can say.

Okay. Thanks.

Our next question is a follow-up question from the line of Barrett Blaschke from MUFG Securities. Please proceed with your question.

Hi guys. One just quick follow-up. And that is, if we are thinking of raze and rebuild and CapEx, how much of the raze and rebuilds, particularly, is assigned to maintenance? And how much is assigned to growth CapEx? Is there a split there?

There is some catch at maintenance CapEx and it is really done on an individual site-by-site basis and you are looking at returns going forward and what would be deemed to be just straight maintenance and what is actually expanding the cash flows of that site.

And then just so I can understand it a little better, about how many raze and rebuilds are you talking about in 2017 for this kind of a number?

Well, I mean just in general, raze and rebuilds can cost 2 million, in the $2 million to $3 million range of $1.5 million to $ 3 million range so that is, it just depends on the individual site and whether you are going to build up the store to a larger footprint or not.

You are picking your better sites. The ones that you are spending that capital on are the ones that you think have more opportunity to do better.

Okay, thank you.

There are no further questions in the queue. I would like to hand the call back over to Mr. Slifka for closing comments.

Thank you for joining us this morning. We look forward to keeping you updated on our progress. Thanks to everybody.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.