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8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 21, 2013

 

 

Lehigh Gas Partners LP

(Exact name of registrant specified in its charter)

 

 

 

Delaware   001-35711   45-4165414

(State or Other Jurisdiction

Of Incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

702 West Hamilton Street, Suite 203

Allentown, PA 18101

(Address of principal executive offices, zip code)

(610) 625-8000

Registrant’s telephone number, including area code

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 7.01. Regulation FD Disclosure.

On May 22, 2013, Lehigh Gas Partners LP (the “Company”) is presenting at the National Association of Publicly Trading Partnerships’ 2013 MLP Investor Conference in Stamford, Connecticut. The presentation and accompanying slide presentation for the event will be available on the Webcasts & Presentations page of the Company’s website at www.lehighgaspartners.com. The slide presentation for the event is attached hereto as Exhibit 99.1 and incorporated herein by reference. The information in this Item 7.01 and Exhibit 99.1 attached hereto is intended to be furnished under Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Act, except as expressly set forth by specific reference in such filing.

 

Item 9.01. Financial Statements and Exhibits

The following exhibit has been filed with this report:

 

Exhibit No.

  

Description

99.1   Information in Presentation by Lehigh Gas Partners LP

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

    Lehigh Gas Partners LP
    By:   Lehigh Gas GP LLC
      its general partner
Dated: May 21, 2013     By:   /s/ Mark L. Miller
      Name: Mark L. Miller
      Title: Chief Financial Officer

 

3

EXHIBIT INDEX

 

Exhibit No.

  

Description

99.1   Information in Presentation by Lehigh Gas Partners LP
EX-99.1
Exhibit 99.1

2
Forward Looking and Cautionary Statements
This
presentation
and
oral
statements
made
regarding
the
subjects
of
this
presentation
may
contain
forward-looking
statements,
within
the
meaning
of
the
Private
Securities
Litigation
Reform
Act
of
1995,
or
the
Reform
Act,
which
may
include,
but
are
not
limited
to,
statements
regarding
our
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
within
the
meaning
of
the
Reform
Act.
The
forward-looking
statements
are
based
upon
our
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
our
control.
The
statements
in
this
presentation
are
made
as
of
the
date
of
this
presentation,
even
if
subsequently
made
available
by
us
on
our
website
or
otherwise.
We
do
not
undertake
any
obligation
to
update
or
revise
these
statements to reflect events or circumstances occurring after the date of this presentation.
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
presentation
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.

3
Management
Representatives
Mark Miller
Chief Financial Officer
Charles Nifong
Vice President of Finance & Chief Investment Officer

4
•
Lehigh Gas Partners LP (“LGP”
or “Lehigh Gas”) is
a leading wholesale distributor of motor fuels and
owner and lessee of real estate related to retail
fuel distribution. Its Predecessor was founded in
1992
Focused on distributing fuels to and owning
and leasing sites primarily located in
metropolitan and urban areas
•
Completed a $138 million Initial Public Offering on
October
30,
2012
(1)
•
Equity market capitalization of $375 million and
enterprise value of $634 million as of 5/16/13
•
As of 3/31/2013, distribute to 779 locations
primarily in the Northeastern United States, Florida
and
Ohio
(2)
208 owned sites and 303 leased sites
(3)
Also distribute to 223 independent dealer
sites and 45 sites through eight sub-
wholesalers
(2)
•
Distributed 591.3 million gallons of motor fuel in
2012
(3)
Lehigh Gas Overview
Top 10
Distributor for
(4)
:
(1)
Includes
$18
million
exercise
of
over-allotment.
(2)
As
of
March
31,
2013.
(3)
On
a
pro
forma
basis.
See
the
press
release
dated
March
25,
2013
for
additional
information.
(4)
Based
on
2012
volume.

5
Lehigh Gas Portfolio Overview
)

6
Lehigh Gas Operations
Industry Value Chain
Pipeline / Storage
Non-Qualifying Income
Retail Distribution
Rental Income (Personalty)
Concessions
Gasoline Station
Wholesale Distributor
Qualified MLP Income
Wholesale Distribution
Rental Income (Realty)
•
Stable cash flow
•
Margin per gallon
•
Limited commodity exposure
•
Multi-year contracts
•
Stable cash flow
•
Prime locations 
•
Multi-year contracts

7
Investment Highlights
•
Stable Cash Flows from Rental Income
and Wholesale Fuel Distribution
•
Prime Real Estate Locations in Areas
with High Traffic
•
Long-Term Relationships with Major
Integrated Oil Companies and Refiners
•
Established History of Completing and
Integrating Acquisitions
•
Aligned Equity Ownership
•
Financial Flexibility to Pursue
Acquisitions and Expansion
Opportunities

8
•
Gasoline consumption in the U.S. has proven to be stable,
with growth in 52 of the last 66
years
•
Since 1985 gasoline consumption has increased from
2.5
to 3.2
billion barrels per year in 2012 (CAGR of 1%)
Down years driven by historical external shocks or
other unusual economic factors
Except for the energy crisis of the late 1970s,
declines were less than 3% in any given year
•
Since 1985, diesel consumption has increased from 0.4 to
0.9 billion barrels in 2011 (CAGR 2.9%)
U.S. Motor Fuel Consumption
(1)
(1)
Source:
Energy
Information
Administration
(EIA).
(2)
Petroleum
Administration
for
Defense
Districts
(PADD).
Motor
Fuel
Consumption
by
PADD
(2)

9
Wholesale Industry Overview
•
Wholesale motor fuel distribution
consists of sales of branded and
unbranded gasoline and diesel to retail
gas station operators and other
wholesale distributors
•
Wholesale marketing is fragmented 
and local
•
Product differentiation
is achieved
through branding gasoline, which can be
sold at a premium price
Exxon, Mobil, BP, Shell and Valero
are considered premium brands
•
SG&A costs are mostly fixed with a small
portion of variable costs
•
Wholesale
fuels
marketing
has
limited
commodity
exposure
•
Lessee dealers
–
Wholesale distributor
owns or leases sites and leases or
subleases sites to the lessee dealer
•
Independent dealer
–
Sites are owned
by an independent dealer or leased by
an independent dealer from a third party
•
Sub-wholesalers
–
Wholesale
distributor sells to sub-wholesalers
•
Company operated stores
–
Wholesale distributor owns or leases
sites and conducts the retail operations
Classes of Trade
Wholesale Business

10
•
Own or lease sites in prime
locations and seek to enhance
cash flow
•
Expand within and beyond core
geographic markets through
acquisitions
•
Serve as a preferred distributor
and dedicated supplier
•
Increase motor fuel distribution
business by expanding     
market share
•
Maintain strong relationships
with major integrated oil
companies and refiners
•
Manage risk and mitigate
exposure
to environmental
liabilities
Lehigh Gas Strategy

11
Lehigh Gas Operating Model
(1)
Lehigh
Gas
–
Ohio,
LLC
(“LGO”).

12
Stable Cash Flows: Wholesale Distribution
(1)
Wholesale
Distribution
Margin
Per
Gallon
represents
revenues
from
fuel
sales
minus
costs
from
fuel
sales
(including
amounts
to
affiliates)
divided
by
the
gallons
of
motor
fuel
distributed.
(2)
YE
(Year
End)
represents
twelve
months
ended
December
31
of
the
applicable
year
and
PF
(Pro
Forma)
represents
2012
pro
forma
as
presented
on
Form
8-K
filed
with
the
SEC
on
March
28,
2013.
(3)
Excludes
gallons
of
motor
fuel
distributed
to
sites
classified
as
discontinued
operations
with
respect
to
the
periods
presented
for
our
predecessor.
Stable cash flows from long-term wholesale motor fuel distribution contracts
•
Our supply agreements with independent dealers generally have 10-year terms
•
Lessee dealers generally have 3-year terms
•
LGO generally has a 15-year term
Gallons
of
Motor
Fuel
Distributed
(2)(3)
Wholesale
Distribution
Margin
Per
Gallon
(1)(2)

13
Number
of
Sites
Owned
and
Leased
(2)
Rental
Income
Per
Site
(1)(2)
Stable cash flows from rental income associated with long-term leases
•
Lease
agreements
with
lessee
dealers
generally
have
3-year
terms
and
had
an
average
of
2.2
years remaining
as of December 31, 2012
•
LGO agreements have 15-year terms and had an average of 14.9 years remaining as of December 31, 2012
Stable Cash Flows: Rental Income
(1)
Rental
income
is
rental
income
from
lessee
dealers
and
from
affiliates.
(2)
YE
(Year
End)
represents
twelve
months
ended
December
31
of
the
applicable
year
and
PF
(Pro
Forma)
represents
2012
pro
forma
as
presented
on
Form
8-K
filed
with
the
SEC
on
March
28,
2013.

14
Prime Real Estate Locations
•
We derive rental income from sites we own or lease that provide convenient fueling
locations primarily in areas that are densely populated
•
We
lease
sites
in
nine
states
(1)
Over
60%
of
US
gasoline
consumption
is
in
the
Midwest
and
Northeast
(2)
•
Limited availability of undeveloped real estate in our current locations presents a high
barrier to entry for the development of competing sites
•
Due to prime locations, owned real estate sites have high alternate use values, which
provides additional risk mitigation
(1)
As
of
March
31,
2013.
(2)
Source:
EIA.
LGP Owned Sites by State
(1)
LGP Owned and Leased Sites by Area
(1)

15
Long-Term Relationships
•
One of the ten largest independent distributors by
volume in the U.S. for Exxon, Mobil, and BP
branded fuels
Also distribute Shell, Valero, Sunoco,
Chevron and Gulf-branded motor fuels
•
Prompt payment history and good credit standing
with suppliers allow us to receive certain term
discounts on fuel purchases, which increases
wholesale profitability
•
Branded fuel is perceived by retail customers as
higher quality and commands a price premium
LGP
Fuel
Distribution
by
Brand
(1)
Brands Distributed
(1)
For
the
Quarter
ending
March
31,
2013.
Relationships
shown
began
with
our
Predecessor.
Supplier
% of
Total
Suppliers
Since:
ExxonMobil
41%
2002
BP
27%
2009
Shell
14%
2004
Valero
4%
2007
Other Branded / Non-Branded
14%
n/a
Total
100%

16
Established History of Acquisitions
•
We have grown primarily through acquisitions
Since 2004, LGP and our Predecessor, have grown the business from 11 owned sites to 208 owned sites, as
of March 31, 2013
We
have
completed
twelve
acquisitions
that
included
10+
sites
per
transaction
•
Majority
of
our
sites
were
purchased
from
major
integrated
oil
companies
•
Established
history
of
quickly
financing
and
closing
acquisitions
•
Wholesale
marketing
is
fragmented
and
local,
providing
many
acquisition
opportunities
Wholesalers
sell
to
121,000
sites
across
the
US
(1)
~73%
of
convenience
store
operators
which
distributed
retail
fuel
own
50
or
fewer
sites
(1)
Major Acquisitions Since 1/1/2009
Recent Sellers
Convenience
Store
Operators
with
Retail
Fuel
Distribution
Site
Count
(3)
(1)
Source:
2012
Association
for
Convenience
&
Fuel
Retailing
(NACS).
(2)
Motiva
is
a
joint
venture
between
Shell
and
Saudi
Arabia
Refining
Company
Inc.
(3)
Source:
2012
NACS
Report.
(2)
Express Lane
2012
48
$45.4
Exxon/Chevron
FL
Dunmore Oil Company
2012
24
$29.0
Exxon/Valero
PA
Motiva Enterprises
(2)
2011
26
$30.4
Shell
30
NJ
BP Products North America
2009
85
$68.4
BP
2
OH & KY
Uni-Mart
2009
24
$12.1
BP
4
OH
States
Seller
Year
Sites
Acquired
Purchase
Price ($MM)
Brand
Wholesale
Supply
Agreements

17
•
On December 21, 2012, we completed the acquisition of assets from Dunmore Oil Company, Inc. and JoJo
Oil Company, Inc. for a purchase price of $29.0 million
Previously a sub-wholesaler of LGP; sites sold approximately 28 million gallons of fuel in 2011
24 sites located in Pennsylvania; 23 owned sites, 1 leased site
Sites are subleased to LGO; estimated $1.7 million aggregate rental income, net of expenses per year
(average $71k / site)
•
On December 22, 2012, we completed the acquisition of Express Lane, Inc. for a purchase price of $45.4
million
48 sites located in Florida; 7 owned sites; 41 leased sites
Sites sold approximately 43 million gallons of fuel in 2011
Sites are subleased to LGO; estimated $4.6 million aggregate rental income, net of expenses per year
(average of $96k / site)
Overview of Dunmore and Express Lane Acquisitions
Map of Express Lane Sites
Map of Dunmore and JoJo Sites

18
•
Liability on portfolio at IPO retained by predecessor entities
•
Rigorous diligence process to identify any issues prior to acquisition
•
Escrow funds at closing for identified liabilities
•
Purchase insurance to protect against cost overruns for known
liabilities and to protect against unknown conditions
•
Participate in state programs that provide funds to assist in
remediation
Risk Management Overview
Environmental
Commodity
Credit
Transportation
•
Purchase and deliver fuel on the same day
•
No overnight ownership of inventory
•
Daily collection and settlement procedures
•
Dealer credit card transactions routed through an LGP
subsidiary
•
Outsource delivery of fuel to independent third party haulers
•
Lowers capital and labor needs and reduces liability
exposure

19
Aligned Equity Ownership
(1)
Lehigh
Gas
Corporation
(LGC)
is
an
entity
in
which
Joe
Topper
holds
a
100%
ownership
interest.
•
Topper Group and LGC
(1)
retain approximately 54.1% ownership in LGP
92.3% of units owned by Topper Group and LGC
(1)
are subordinated
•
Lehigh Gas GP (the general partner) has a non-economic general partner interest in Lehigh
•
45.9% of LGP held by public
Topper Group / LGC vs. Public
Ownership
(1)
Topper Group / LGC Common vs.
Subordinated
Unit
Ownership
(1)

20
Historical Performance
(1)
Based
on
the
December
31,
2012
pro
forma
as
presented
on
Form
8-K
filed
with
the
SEC
on
March
28,
2013.
(2)
PF
2012
EBITDA
excludes
approximately
$7.7
million
in
expenses
in
selling,
general,
and
administrative
expenses
related
to
our
initial
public
offering
and
formation
transactions
and
the
two
transactions
closed
at
year
end.
See
the
8-K
filed
with
the
SEC
on
March
25,
2013
for
additional
detail.
Revenue
(1)
EBITDA
(1)(2)
Fuel
Gross
Profit
(1)

21
First Quarter Overview
•
Distributed 149.7 million gallons, a 12.7%
increase
relative
to
2012
(1)
•
Generated gross profit from fuel sales of $10.3
million,
a
41.7%
increase
relative
to
2012
(1)
•
Generated adjusted EBITDA of $12.6 million, a
53.4%
increase
relative
to
2012
(1)
•
Distributable Cash Flow of $9.3 million or $0.62
per common unit
•
Increased the distribution 3.4% to $1.81 / unit
on an annual basis
•
On May 13, increased credit facility by $75
million to $324 million
•
$126 million in pro forma availability
•
Amended certain financial covenants and
other terms to provide greater flexibility
for acquisitions
•
Committed to prudent acquisition strategy with
conservative financial management
(1)
Based
on
the
March
31,
2012
pro
forma
as
presented
on
Form
8-K
filed
with
the
SEC
on
May
14,
2013.
Summary First Quarter Metrics
(Dollars in thousands, except as noted)
Fuel Gross Profit
10,266
$     
Gallons Distributed (millions)
149.7
Margin per Gallon ($)
0.069
$       
Net Rental Income (revenue less expenses)
6,385
$       
EBITDA
12,428
$     
Non-Cash Equity Incentive Comp Expense
196
            
Adjusted EBITDA
12,678
$     
Distributable Cash Flow (DCF)
9,338
$       
DCF per Unit ($)
0.62
$         
Distribution per Unit ($)
0.4525
$     
Coverage (DCF / Distribution)
1.4x
Distribution Increase Over Previous Quarter
3.4%
Distribution Yield (as of 5/16/2013)
7.3%

22
Investment Highlights
•
Stable Cash Flows from Rental Income
and Wholesale Fuel Distribution
•
Prime Real Estate Locations in Areas
with High Traffic
•
Long-Term Relationships with Major
Integrated Oil Companies and Refiners
•
Established History of Completing and
Integrating Acquisitions
•
Aligned Equity Ownership
•
Financial Flexibility to Pursue
Acquisitions and Expansion
Opportunities