Lehigh Gas Partners LP Reports First Quarter 2014 Results
ALLENTOWN, PA (May 7, 2014) - Lehigh Gas Partners LP (NYSE:LGP) (the "Partnership," "we," or "us") today reported its financial results for the quarter ended March 31, 2014 and declared its first quarter 2014 cash distribution of $0.5125 per unit ($2.05 per unit on an annual basis).
In the First Quarter of 2014, the Partnership:
- Distributed 159.6 million gallons of fuel compared to first quarter 2013 volume of 149.7 million gallons of fuel, a 6.6% increase.
- Generated gross profit from fuel sales of $9.7 million compared to first quarter 2013 gross profit from fuel sales of $9.9 million, a 2.8% decrease.
- Generated net rental income (rent income minus rent expense) of $6.9 million compared to first quarter 2013 net rental income of $6.4 million, a 7.8% increase.
- Generated EBITDA and Adjusted EBITDA of $11.5 million and $11.0 million, respectively, compared to first quarter 2013 EBITDA and Adjusted EBITDA of $12.4 million and $12.6 million, respectively, a 7.2% and 13.1% decline, respectively.
- Generated Distributable Cash Flow of $7.2 million or $0.39 per weighted average common unit on a diluted basis compared to first quarter Distributable Cash Flow of $9.3 million or $0.62 per common unit
- Entered into a $450 million amended and restated credit facility, increasing by $126 million the Partnership's borrowing capacity
- Declared a first quarter distribution of $0.5125 per unit, maintaining the Partnership's distribution rate from the fourth quarter of 2013 and representing a 13.3% increase from the first quarter 2013 distribution.
First Quarter 2014 Results
Net income for the first quarter of 2014 totaled $1.4 million or $0.07 per weighted average common unit on a diluted basis. For the quarter, EBITDA totaled $11.5 million, Adjusted EBITDA totaled $11.0 million and Distributable Cash Flow amounted to $7.2 million or $0.39 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.
"We continued to face margin headwinds during the quarter as motor fuel prices rose during the period, continuing their upward trend that began in the fourth quarter. In addition, the harsh winter in the Northeast also depressed demand for the quarter," said Chairman and CEO Joe Topper. "Over a yearly cycle, margins tend to normalize and demand increases as we enter into the warmer months of the year. We set our distribution policy with these factors in mind and our declared first quarter distribution is consistent with our objective to maintain a sustainable, prudent level of distributions over a yearly cycle," Topper added.
Total revenue amounted to $482.0 million for the quarter ended March 31, 2014, consisting of $471.2 million of aggregate revenues from fuel sales, including revenues from fuel sales to affiliates, and $10.7 million of aggregate rent income, including rent income from affiliates. During the quarter, we wholesale distributed 159.6 million gallons of fuel at an average selling price of $2.899 per gallon and at an average wholesale gross margin of $ 0.059 per gallon, resulting in a wholesale gross profit of $9.4 million. During the quarter, we retail distributed 15.2 million gallons at an average selling price of $3.508 per gallon and at an average retail gross margin of $0.021 per gallon, resulting in a retail gross profit of $0.3 million. Total gross profit from motor fuels for the quarter was $9.7 million. For the quarter ended March 31, 2013, the Partnership wholesale distributed 149.7 million gallons of fuel at an average selling price of $3.080 per gallon and an average margin of $0.066 per gallon, resulting in a gross profit of $9.9 million. In the first quarter of 2013, the Partnership recorded $10.3 million in rent income.
The decrease in gross profit from fuel sales for the first quarter of 2014 relative to 2013 was primarily due to the lower average fuel margin for the quarter in 2014, mitigated by the increase in volume relative to the first quarter of 2013. Based on U.S. Energy Information Administration data, retail fuel prices on the East Coast rose by approximately 5% during the quarter. In general, rising fuel prices tend to decrease margins. The increase in fuel volume for the quarter was primarily due to the acquisitions completed in the third and fourth quarters of 2013, offset by volume declines due to weather, certain marketplace volume declines and, on a net basis, certain dealer supply contracts that did not renew. The increase in rental income is attributable to the impact of acquisitions completed during the past year offset by the termination of leases associated with the commission site conversion in the third quarter of 2013 and certain closed sites.
Total expenses amounted to $476.5 million for the quarter ended March 31, 2014, including rent expense of $3.8 million, operating expenses of $2.2 million, depreciation and amortization of $5.9 million, and selling, general and administrative expenses of $4.5 million. Included in selling, general and administrative expenses for the quarter is $0.3 million in acquisition expenses related to acquisitions announced subsequent to the end of the quarter. For the quarter, the Partnership also recorded income tax expense of $0.1 million. For the quarter ended March 31, 2013, total expenses amounted to $464.4 million, including rent expense of $3.9 million, operating expenses of $0.8 million, depreciation and amortization of $4.8 million and selling, general and administrative expenses of $3.6 million.
The decrease in rent expense for the quarter is due the termination of certain Getty leases that occurred during the quarter. Operating expenses increased by $1.4 million for the quarter relative to 2013 primarily due the increase in the number of sites owned or leased as result of acquisitions, including completing deferred maintenance on certain acquired sites, increased operating expenses associated with the commission class of trade sites, and the timing of the completion of certain maintenance items. In addition, operating expenses include a $0.4 million charge relating to the termination of the contracts at certain Chevron branded sites and the work associated with rebranding the sites to Exxon. Selling, general and administrative expenses increased in the first quarter of 2014 relative to 2013 primarily due to an increase in equity based compensation.
Acquisition and Financing Activity
As previously announced, the Partnership entered into an agreement on April 16, 2014 to acquire 55 wholesale supply contracts, two commission marketing contracts, 11 fee or leasehold sites and certain other assets from affiliates of Atlas Oil Company for $38.5 million, subject to certain closing adjustments. In addition, the Partnership will acquire certain short-term financing assets associated with the wholesale supply and commission marketing contracts for the face value of the financing assets at closing.
The assets are located in the metro Chicago area and are branded BP. The wholesale supply contracts have a remaining average term of 15 years and the fee or leasehold sites are currently leased to third party commission agents. The short-term financing assets relate to previously negotiated purchase agreements of certain sites by the dealers occupying the locations. All of the financing assets relate to sites supplied under contracts acquired in this transaction. The transaction is expected to close in the second quarter of 2014 and will be funded by availability under the credit facility.
As previously announced, on April 30, 2014, the Partnership acquired Roanoke, VA based Petroleum Marketers, Inc. ("PMI" or the "Company") for net total consideration of $61 million. PMI operates two primary lines of business: convenience stores and petroleum products distribution. In its convenience store business, PMI operates 85 convenience stores and 9 co-located branded quick service restaurants located primarily along the Interstate 81 corridor in Virginia, with a concentration in the Roanoke, VA area. The petroleum products business distributes motor fuels and other petroleum products to customers throughout Virginia, West Virginia, Tennessee and North Carolina.
As part of the acquisition of PMI, LGP divested the lubricants portion of the petroleum products distribution business at closing for $14 million, which is reflected in the net total consideration for PMI of $61 million. The lubricants business was divested to an unrelated entity financed by the Chairman and CEO of LGP, Joe Topper, with the intent to sell the business to an independent third party at a later date. As part of the purchase agreement for the divestiture of the lubricants business, LGP is entitled to receive the profit, if any, from the sale of the lubricants business to a third party. The transaction was funded under the Partnership's credit facility.
Subsequent to the quarter close and in conjunction with the acquisition of PMI and the pending acquisition of the Atlas assets, the Partnership amended its Omnibus Agreement with its general partner and Lehigh Gas Corporation with regards to the management fee. The revised management fee consists of a base monthly fee of $670 thousand per month and a variable fee of between zero and $0.003 per gallon of wholesale fuel distributed and $0.015 per gallon of retail fuel sold.
The Partnership divested two sites during the quarter for a total gain of $1.5 million.
As previously announced, on March 4, 2014, the Partnership entered into a $450 million amended and restated credit facility. The amended and restated facility replaced the Partnership's prior $324 million credit facility. In addition to the increased borrowing capacity, the amended and restated facility provides the Partnership with increased financial and operational flexibility and a longer tenor than the prior facility.
As of March 31, 2014, the Partnership had $158.9 million in outstanding borrowings under its credit facility. The Partnership had a nominal $278.0 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 the Partnership's cash distribution for the first quarter of $0.5125 per unit ($2.05 per unit on an annual basis). The distribution represents an annual distribution rate of 7.6% based on the Partnership's common unit closing price on May 6, 2014 of $26.92 and a 13.3% increase from the first quarter 2013 distribution. The first quarter distribution is payable on May 29, 2014 to all unitholders of record as of May 19, 2014. In reviewing its distribution policy, the Board determined that it will continue to evaluate the Partnership's distribution each quarter.
First Quarter Earnings Call
The management team of the Partnership will hold a conference call on Thursday, May 8, 2014 at 9:30 AM ET to discuss the quarterly results. The dial-in information for the call is:
Live Dial-in Information:
Primary Dial-in #: 800.322.2803
Secondary Dial-in#: 617.614.4925
Participant Passcode: 16948480
Replay Dial-in Information
Available From: 5/8/20141:30 PM ET
Available To: 5/15/201411:59 PM ET
Primary Dial-in #: 888.286.8010
Secondary Dial-in #: 617.801.6888
Participant Passcode: 65451915
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 1,100 locations and owns or leases more than 625 sites in fourteen states: Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire, Maine, Tennessee, Maryland, Delaware, West Virginia 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.
Vice President, Investor Relations
Lehigh Gas Partners
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 10, 2014 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:
1Q 2014 earnings press release final
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Source: Lehigh Gas Partners LP via Globenewswire