Lehigh Gas Partners LP: Reports Fourth Quarter and Full Year 2013 Results and Announces a 2.0% Increase in Its Quarterly Cash Distribution

Lehigh Gas Partners LP Reports Fourth Quarter and Full Year 2013 Results and Announces a 2.0% Increase in Its Quarterly Cash Distribution

ALLENTOWN, PA (March 6, 2014) - Lehigh Gas Partners LP (NYSE: LGP) (the "Partnership," "we," or "us") today reported its financial results for the quarter and full year ended December 31, 2013, and announced that the Board of Directors of its general partner approved a 2.0% increase in the Partnership's cash distribution per unit from the current annual rate of $2.01 per unit ($0.5025 per quarter) to $2.05 per unit ($0.5125 per quarter).  In addition to the actual financial results for the quarter, the Partnership is providing certain pro forma results for the periods ended December 31, 2012.  The Partnership completed its initial public offering on October 30, 2012, and, as such, management believes that the pro forma results for the periods ended December 31, 2012 provide investors with a more relevant comparison than the actual results of our Predecessor for the periods ended December 31, 2012.  Please see the section entitled "Pro Forma Financial Results" for additional information on our pro forma financial results.

In the Fourth Quarter of 2013, the Partnership:  

• Distributed 167.0 million gallons of fuel compared to pro forma fourth quarter 2012 volume of 153.1 million gallons of fuel, a 9.1% increase. 

• Generated gross profit from fuel sales of $10.9 million compared to pro forma fourth quarter 2012 gross profit from fuel sales of $14.2 million, a 23.3% decrease.  

• Generated net rental income (rent income minus rent expense) of $6.9 million compared to pro forma fourth quarter 2012 net rental income of $4.1 million, a 69.1% increase. 

• Generated Adjusted EBITDA of $13.2 million compared to pro forma fourth quarter 2012 Adjusted EBITDA of $6.5 million, an increase of over 2.0x. 

• Generated Distributable Cash Flow of $9.0 million or $0.56 per weighted average common unit on a diluted basis compared to pro forma fourth quarter Distributable Cash Flow of $3.2 million or $0.21 per common unit, an increase of over 2.7x. 

• Acquired 44 independent dealer supply contracts, 5 subjobber supply contracts and certain other assets in the Richmond, VA area for $10.7 million in cash. 

• Completed its first follow-on equity offering, selling 3.565 million common units at $26.90 per unit and generating net proceeds, after underwriting discounts and offering expenses, of approximately $91.4 million. 

• Declared a fourth quarter distribution of $0.5125 per unit, a 2.0% increase over the current quarterly distribution of $0.5025 per unit, and its fourth consecutive quarterly distribution increase. 

Fourth Quarter 2013 Results

Net income for the fourth quarter of 2013 totaled $3.9 million or $0.25 per weighted average common unit.  For the quarter, EBITDA totaled $12.3 million, Adjusted EBITDA totaled $13.2 million and Distributable Cash Flow amounted to $9.0 million or $0.56 per weighted average common unit on a diluted basis.  Please refer to the section included herein under the heading "Non-GAAP Financial Measures of "EBITDA", "Adjusted EBITDA" and "Distributable Cash Flow" for a discussion of our use of non-GAAP adjusted financial information.

"The generally rising motor fuel price environment during the quarter was a headwind to our margins during the period.  Despite the challenging environment in the quarter, our results indicate the stability of our business model and we were pleased to announce our fourth consecutive quarterly distribution increase," said Chairman and CEO Joe Topper.  "We finished our first full year as a public partnership on an active note, completing a follow-on equity offering and closing an acquisition in December.  The Partnership is well positioned to continue to grow and to generate distributions for our unitholders in 2014," Topper added.  

Total revenue amounted to $485.1 million for the quarter ended December 31, 2013, consisting of $474.2 million of aggregate revenues from fuel sales, including revenues from fuel sales to affiliates, and $10.9 million of aggregate rent income, including rent income from affiliates.  During the quarter, we wholesale distributed 167.0 million gallons of fuel at an average selling price of $2.787 per gallon and at an average wholesale gross margin of $0.063 per gallon, resulting in a wholesale gross profit of $10.5 million.  During the quarter, we retail distributed 15.3 million gallons at an average selling price of $3.330 per gallon and at an average retail gross margin of $0.026 per gallon, resulting in a retail gross profit of $0.4 million.  Total gross profit from motor fuels for the quarter was $10.9 million.  For the quarter ended December 31, 2012, on a pro forma basis, the Partnership wholesale distributed 153.1 million gallons of fuel at an average selling price of $3.002 per gallon and an average margin of $0.093 per gallon, resulting in a gross profit of $14.2 million.  On a pro forma basis in the fourth quarter of 2012, the Partnership recorded $7.3 million in rent income.

The decrease in gross profit from fuel sales for the fourth quarter of 2013 relative to 2012 was primarily due to the higher average fuel margin in the fourth quarter of 2012, offset by the higher fuel volume in the fourth quarter of 2013.  The higher average fuel margin in the fourth quarter of 2012 was due in part to the approximately 10% decrease in retail gasoline prices on the East Coast of the United States during the period compared to the generally increasing retail gasoline prices for the same region during the fourth quarter of 2013 as based on the average weekly retail regular gasoline prices as reported by the U.S. Energy Information Administration.  The increase in fuel volume was primarily due to the acquisitions completed during the past year offset primarily by certain marketplace volume declines and to a lesser extent, and on a net basis, certain dealer supply contracts that did not renew.  The increase in rent income in the fourth quarter of 2013 relative to 2012 is due primarily to the additional rent associated with the acquisitions completed during the past year.  

Total expenses amounted to $479.3 million for the quarter ended December 31, 2013, including rent expense of $4.0 million, operating expenses of $1.4 million, depreciation and amortization of $6.0 million, and selling, general and administrative expenses of $4.6 million.  Included in selling, general and administrative expenses for the quarter is $0.3 million in acquisition expenses related to completed acquisitions.  For the quarter, the Partnership also recorded an income tax benefit of $1.7 million.  Included in this number is a net benefit $1.9 million consisting of non-cash items, including a $1.2 million benefit related to the release of a valuation allowance on previously recorded deferred tax assets.  For the quarter ended December 31, 2012, pro forma total expenses amounted to $463.6 million, including rent expense of $3.3 million, operating expenses of $0.8 million, depreciation and amortization of $4.3 million and selling, general and administrative expenses of $10.3 million.  

The increase in rent expense in the fourth quarter of 2013 relative to 2012 is due to the increase in leasehold sites, primarily as a result of the Express Lane acquisition and the Getty leases completed last year late in the fourth quarter, and to a lesser extent, the Rogers and Rocky Top acquisitions completed in the third quarter of 2013.  The increase in operating expenses for the fourth quarter of 2013 relative to 2012 is due to the increased number of owned and leased sites relative to the previous year.  The decrease in selling, general and administrative expenses in the fourth quarter of 2013 relative to 2012 is primarily due to expenses associated with our IPO included in the fourth quarter of 2012, offset by increased professional fees, equity compensation expense and public company expenses in the fourth quarter of 2013.

Acquisition and Financing Activity

Acquisitions

As previously announced, the Partnership closed on the acquisition of certain assets of Manchester Marketing, Inc. ("Manchester") on December 19, 2013.  The total consideration, net of working capital and other adjustments, was $10.7 million in cash.  The acquisition consisted of 44 independent dealer supply contracts, 5 subjobber supply contracts and certain other assets.  The acquired supply contracts are primarily for branded motor fuels and the weighted average remaining term on the supply contracts is approximately 9 years.  The sites supplied under the acquired contracts are located in the Richmond, VA area.  The transaction was financed under the Partnership's credit facility.  

Financing Activity

The Partnership completed its first follow-on equity issuance on December 10, 2013.  LGP sold a total of 3.565 million common units at $26.90 per common unit in the transaction, inclusive of the full exercise of the underwriters' over-allotment option, generating net proceeds of approximately $91.4 million.  The Partnership used the proceeds to repay borrowings under the Partnership's credit facility and for general partnership purposes.  

On March 4, 2014, the Partnership entered into a $450 million amended and restated credit facility.  The amended and restated facility replaces the Partnership's prior $324 million credit facility.  In addition to the larger facility size, the amended and restated facility provides the Partnership with increased financial and operational flexibility.  Among other items, the facility allows for increased leverage and structural flexibility in regards to acquisitions, extends the term of the facility to five years, enhances the capital structure and operational flexibility of the Partnership and lessens the administrative requirements on the Partnership.  A more detailed description of the amended and restated credit facility may be found in the Form 8-K filed today with the Securities and Exchange Commission.

As of December 31, 2013, the Partnership had $146.3 million in outstanding borrowings under the previous credit facility.  Pro forma for the amended and restated facility, the Partnership had $291.4 million available for borrowing, net of outstanding borrowings and letters of credit.  

Distributions to Unitholders

The Partnership announced today that the Board of Directors of its general partner approved a 2.0% increase in the Partnership's cash distribution per unit from the current annual rate of $2.01 per unit ($0.5025 per quarter) to $2.05 per unit ($0.5125 per quarter).  The increased distribution represents an annual distribution rate of 7.6% based on the Partnership's common unit closing price on March 5, 2014 of $26.86.  The new quarterly distribution rate of $0.5125 per unit commences with the payment of the fourth quarter cash distribution, payable on March 27, 2014 to all unitholders of record as of March 17, 2014.  As a result of the increased distribution for the fourth quarter, the Partnership will also make a payment with respect to the Incentive Distribution Rights of approximately $31 thousand in connection with the payment of the fourth quarter distribution.  In total, the annual cash distribution per unit increased 17.1%, or $0.30 per unit, during the past year from the annual distribution rate of $1.75 per unit as of December 31, 2012.  In reviewing its distribution policy, the Board determined that it will continue to evaluate the Partnership's distribution each quarter.  As in prior quarters, it is the intent of the Partnership going forward to declare its quarterly cash distribution concurrently with its earnings release.

Fourth Quarter Earnings Call

The management team of the Partnership will hold a conference call on Friday, March 7, 2014 at 9:30 AM EDT to discuss the quarterly results.  The dial-in information for the call is:

Live Dial-in Information:

Primary Dial-in #:                888.424.8151
Secondary Dial-in#:            847.585.4422
Participant Passcode:         7762510#
Preregistration:                   No

Replay Dial-in Information

Available From:                   3/7/2014 12:00 PM ET
Available To:                       3/14/2014 11:59 PM ET
Primary Dial-in #:                 888.843.7419
Secondary Dial-in #:            630.652.3042
Participant Passcode:          7762510#

About Lehigh Gas Partners LP

Lehigh Gas Partners, headquartered in Allentown, PA, is a leading wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels.  Formed in 2012, Lehigh Gas Partners distributes fuel to over 800 locations and owns or leases more than 550 sites in thirteen states: Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire, Maine, Tennessee, Maryland, Delaware and Virginia.  The company is affiliated with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf and Citgo.  LGP ranks as one of ExxonMobil's largest distributors by fuel volume in the United States and in the top 10 for many additional brands.  For additional information, please visit www.lehighgaspartners.com.

Investor Contact:

Karen Yeakel
Vice President, Investor Relations
Lehigh Gas Partners
610-625-8126
kyeakel@lehighgas.com

Forward Looking and Cautionary Statements

This press release and oral statements made regarding the subjects of this release may contain forward-looking statements, which may include, but are not limited to, statements regarding the Partnership's plans, objectives, expectations and intentions and other statements that are not historical facts, including statements identified by words such as "outlook," "intends," "plans," "estimates," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "predicts," "anticipates," "foresees," or the negative version of these words or other comparable expressions. All statements addressing operating performance, events, or developments that the Partnership expects or anticipates will occur in the future, including statements relating to revenue growth and earnings or earnings per unit growth, as well as statements expressing optimism or pessimism about future operating results, are forward-looking statements.  The forward-looking statements are based upon the Partnership's current views and assumptions regarding future events and operating performance and are inherently subject to significant business, economic and competitive uncertainties and contingencies and changes in circumstances, many of which are beyond the Partnership's control.  The statements in this press release are made as of the date of this press release, even if subsequently made available by the Partnership on its website or otherwise.  The Partnership does not undertake any obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

Although the Partnership does not make forward-looking statements unless it believes it has a reasonable basis for doing so, the Partnership cannot guarantee their accuracy.  Achieving the results described in these statements involves a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the factors discussed in this report and those described in the "Risk Factors" section of the Partnership's Form 10-K filed on March 28, 2013 with the Securities and Exchange Commission as well as in the Partnership's other filings with the Securities and Exchange Commission.  No undue reliance should be placed on any forward-looking statements.

Note to Non-United States Investors: This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b).  Brokers and nominees should treat one hundred percent (100%) of Lehigh Gas Partners LP's distributions to non-U.S. investors as attributable to income that is effectively connected with a United States trade or business.  Accordingly, Lehigh Gas Partners LP's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

For full press release including financial tables please click the link below: