Lehigh Gas' C-store Acquisitions Paying Off

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Lehigh Gas' C-store Acquisitions Paying Off


ALLENTOWN, Pa. -- Lehigh Gas Partners LP is "pleased" with its recent acquisitions of 34 sites from Rocky Top Markets LLC and 17 convenience stores from Rogers Petroleum Inc., both of which closed in its fiscal 2013 third quarter, Chairman and CEO Joseph Topper said during today's earnings call.

"The Rogers and Rocky Top transactions are adding meaningfully to our bottom line," he reported. The two transactions came with a combined $56.8-million price tag, of which $31.8 million was paid at the time of closing.

Overall, the Allentown, Pa.-based master limited partnership (MLP) has purchased 121 sites since its October 2012 initial public offering. Topper is so pleased with all of its acquisitions that he said several more can be expected in the future. As for the location of potential acquisitions, the company is looking to the Southeast, the CEO noted.

In its latest quarter, Lehigh Gas further entrenched itself into the c-store industry as it also assumed 50 commission agent site leases and related assets from its Lehigh Gas-Ohio LLC affiliate. "We studied the assumption of these commission agent site leases in great detail and believe that, in the long run, having these commission agent relationships directly with the partnership is the best course of action," Topper explained. "The direct relationship enables the partnership to most effectively manage the assets at these locations."

The MLP will pay a commission of 3 cents to 4 cents per gallon of fuel sold at these 50 locations, according to Topper.

As a further sign of its commitment to retail, Lehigh Gas will soon begin to report quarterly results in its retail and wholesale divisions separately. Hence, the MLP did not break down all Q3 financial results for its retail division. However, the company did release some figures. Gross profit from fuel sales was $11.7 million in its latest quarter ended Sept. 30, compared to $9.4 million in the year-ago period. Fuel margins reached 7.3 cents per gallon, higher than the company's expectations.

On the down side, same-store merchandise sales decreased by 4 percent year over year. Topper attributed the decline to the digestion of leases the company took over from Getty Realty Corp., as well as poor weather in the Southeast.

Companywide, Lehigh Gas earned net income of $4.9 million in the third quarter and had distributable cash flow of $11 million, often a better indicator of the health of an MLP. The company also announced a 5.2-percent increase in its quarterly distribution, to 50.25 cents per unit.

Lehigh Gas Partners LP is a wholesale distributor of motor fuels and owns or leases more than 500 sites in Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire and Maine.