Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2014 Earnings Conference Call for Lehigh Gas Partners. At this time, all participants are in a listen-only mode. Later in the call, we will conduct a question-and-answer session. Instructions will be given to you at that time on how you may participate. This conference call may contain forward-looking statements relating to the Partnership’s future business expectations and predictions and financial conditions and results of operations. These forward-looking statements involve certain risks and uncertainties. The Partnership has listed some of the important factors that may cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements, in its first quarter 2014 earnings news release. The news release maybe viewed on the Lehigh Gas Partners’ website at www.lehighgaspartners.com. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. In addition, certain non-GAAP financial measures will be discussed on this call. The Partnership has provided a description of these measures, as well as a discussion of why they believe this information is useful to management in its Form 8-K furnished to the SEC yesterday. The Form 8-K may be accessed through a link on the Partnership's website at www.lehighgaspartners.com. In addition to accessing the Form 8-K on the Partnership's website, you can also sign-up for LGP's eBlast communication to keep you up-to-date on the activities of the Partnership and be notified of the latest Partnership news. As a reminder, this conference call is being recorded. I will now turn the conference call over to your host, Joe Topper, the Chairman and CEO.

Thank you and good morning. Welcome to Lehigh Gas Partners' first quarter 2014 earnings call. Joining me on the call today are Mark Miller, Chief Financial Officer; and Dave Hrinak, President. I will provide a brief overview of our first quarter results, as well as some initial commentary followed by a review of our first distribution and then review the acquisition we announced subsequent to the quarter end. Once we have concluded our remark -- prepared remarks we will open the session to your questions. Net income for the first quarter of 2014 totaled $1.4 million or $0.07 per basic common unit. For the quarter, EBITDA totaled $11.5 million. Adjusted EBITDA totaled $11 million and distributable cash flow amounted to $7.2 million or $0.39 per common unit. Our wholesale gross margin for the quarter was $5.09 per gallon. The first quarter of the year is typically the weakest quarter in terms of both demand and margin for motor fuels. As in the fourth quarter, gasoline prices generally rose during the first quarter, which continued to put pressure on our margins. Based on U.S. Energy Administration data, retail prices on the East Coast which represents the majority of our current markets rose a little over 5% during the first quarter. Also weather continued to be a factor for the quarter as a result of the harsh winter particularly in the Northeast. Based upon National Weather Service data, there were seven winter storms that affected our Northeast markets during the quarter. Approximately 14 days or 60% of our total quarter had material winter precipitation. As in the fourth quarter, our rental revenue provided us a steady revenue stream that was not impacted by the winter weather of the quarter. We reported $6.9 million in net rental income for the quarter or slightly…

Thank you, Joe. During the first quarter of 2014, let me just give you on a wholesale basis, 159.6 million gallons of motor fuels, resulting in a $2.90 average selling price per gallon and a $0.059 average wholesale margin per gallon. Wholesale gross profit from motor fuel sales totaled $9.4 million for the quarter. In our retail segment, which represents our commission agent sites, we distributed 15.2 million gallons resulting in a $3.51 average selling price per gallon and a $0.021 average retail margin per gallon. Retail gross profit from motor fuel sales totaled $321,000 for the quarter. As noted in previous quarters, the wholesale distributed to our retail segment saw aggregate total gallons distributed for the quarter was 159.6 million gallons rather than 159.6 million wholesale gallons plus 15.2 million retail gallons. For the same period in 2013, the partnerships wholesale distributed 149.7 million gallons at an average selling price of approximately $3.080 per gallon and have a $0.066 average margin per gallon. Gross profit from fuel sales for the first quarter 2013 totaled $9.9 million. There were no retail segment sales in the first quarter 2013. Relative to the results in the first quarter 2013, our wholesale fuel line increased by 6.6% and our wholesale gross profit from fuel sales decreased by 5.7% for the first quarter 2014. The decline in gross profit was driven by the lower margin for the first quarter compared to last year. Net rental income which is rent income less rent expense, totaled $6.9 million for the quarter for the same period in 2013. The partnership recorded $6.4 million in net rental income. The increase in net rental income for the first quarter of 2014 relative to last year is primarily due to the increase in rent from acquisitions completed during the past…

Thank you, Mark. That concludes our prepared remarks. Operator, we would like to open the line for questions. Thank you.

(Operator Instructions) And our first question will come from the line of Ben Brownlow with Raymond James. Please proceed.

Good morning. Joe, can you talk about some of the benefits that you see of operating the retail merchandise side of the business of PMI under the MLP umbrella? Or is it purely a simply timing issue, and if it’s a timing issue, how quickly would you expect to shift or sell that part of the business over to a third party?

Ben, thanks. It was primarily a timing issue. I think the way we’ve got the model set up with the fuel thing and the Partnership and the retail sale in the outside to either third parties of LGO, I would expect that by the end of the year the 85 sites would be outside of the Partnership at that point in time and be operating the way the rest of the company is operating.

Great. And in that interim, can you give us a sense of what the OpEx structure and D&A run rate will be, including the Atlas and PMI kind of post those two deals?

I am sorry -- I am confused by what you’re asking. I’m not going to give you a necessarily guidance by it, but we are going to be consolidating the Lehigh Gas, wholesale is going to be selling the entity, the PMI entity, it’s fuel, so it’s fuel margin will be sitting up into the qualified income. And so we will see very little tax leakage from it. The acquisition fits within the model of what we’ve done in the past. So, I believe there will be a creed of almost immediately to earnings.

Okay. And the acquisition fees on those two deals or the bulk of those fees. Will those realize in the first quarter or is there still some kind of flutter in the second quarter?

They will be in the second quarter.

Okay.

The deal closed May 1. The deal closed May 1. So that’s when it -- the April 30th. So that’s when the fees will be realized.

Okay. I didn’t know the $0.3 million of that was part of the series? And then just last question from me, are you seeing any improvement at demand trends so far in the second quarter?

Yes, we are. I mean, obviously the weather is better and we’re seeing a lot of things that are positively -- fuel has dropped significantly in the last two or three weeks, so that’s a good sign and a typical sign for the industry.

Great. Thank you, guys.

Thank you.

(Operator Instructions) And our next question will comes from the line of Ethan Bellamy with Baird. Please proceed.

Good morning, all.

Good morning, Ethan.

Joe, we haven’t talked in a while about the really big picture for demand. What’s your base case assumption for the next three years given trends in vehicle miles efficiency, alternative fuels? Are we looking at a minus 1% market, are we looking at a plus 1% market for diesel and no gas altogether?

I would break it up in two markets, Ethan. I would say that northeast, what I thought, we were at a minus 1. I’m going to say, I think the northeast is probably closer to a minus 2%, minus 3%. And I would say that’s north of Baltimore, Baltimore going north in those markets. I would say that my trend for the south in Virginia and Tennessee and Florida, I would say it’s flat, that population growth will offset the decreased demand by our fuel vehicles.

Okay. And what’s the driver of that decline in northeast? Is it GDP related, is it efficiency?

I think it’s the alternate user but I think it’s the -- meaning, there is public transportation up here. I think that the -- there is actually, I think, population is not necessarily growing in up here also. So, I think you will have 2% efficiency increases, not being offset by population or job growth in northeast.

Got it. Does that mean we should expect to see you in Texas sometime soon?

Texas is a wonderful state. It’s getting a little crowded down there but I would love to be in Texas.

Got it. So that’s a good segway. Could you give us your thoughts on the Sunoco Susser deal and how that will play into your M&A activity?

Sure. I think that’s a wonderful transaction for both companies. I think the way they’re structuring it where they’re going to be more efficient with their earnings and distribution through the partnership is a good idea, sort of kind of the advantage we’re taking with the commission and also like in burdening the income over from LGO. So in many ways that model is kind of like what we’re doing. I would tell you that they paid a formal little price and so as the larger acquisitions get at that pricing that will be a drag on us doing larger deals. But we focused on the deals in the $25 million to $75 million range and I think that really won’t affect that sized transaction for us.

Okay. And last question, you’ve got pretty strong year-over-year double-digit distribution growth. What type of outlook should we have for distribution growth then say ’15 and ’16, if all goes as planned?

I would like to say -- I don’t want to do this, I would say 8 to 12 would be a good number for us to forecast the dividend growth for the second half of ’14 and ’15.

Excellent. Thank you so much, Joe.

Okay.

And our next question will comes from the line of Matt Niblack with HITE. Please proceed.

Hey, thank you. So I guess, first on the demand. When you referenced, the demand was impacted by factors other than weather. Were you referring to this acceleration of the decline in the broader market to 2% or 3%, or is it something else that you were referring to in the press release?

The combination of the two, what was the most disruptive was the weather. Normally, we would have seasonal demand, how I would tell you is that in a typical year, the first quarter, if the quarter -- the year divided into four quarters of 25% each. The first quarter is around 22% of demand for the year, just because of traffic patterns and seasonality. People visit their mother, in-laws over Christmas, they are not going back again in January. But and this was more accelerated because economically, but the snow impact there was less driving because of that. So it was compounding factor both the economics and weather on the first quarter.

Okay. So when you are looking at the second quarter so far than on demand, this is looking more like down 2% to 3% year-over-year versus last year as opposed to the larger decline in Q1 on a same-store basis?

I would say, down 2% in the Northeast and flat in the rest of the markets that we are in.

Okay. Rest of the markets, so that include, I think Ohio is that different market in the Northeast?

I would say, Cincinnati is different than Cleveland. I would take Cincinnati south, the Texas, not Texas, Florida and Tennessee and Virginia so far.

Okay. And then on margins, you feel you are capturing the margin that you would expect from the changing fuel prices as we move into 2Q?

Absolutely, we -- that's something we look at in model everyday.

Okay. So there is no sort of secular degradation of margin that’s reflected in the results in Q1, it’s merely the move in the gasoline price?

There is nothing that I have seen in the marketplace, I will say, structurally we are moving down from an average of 6.5 and 6.6 on a basis. I -- when it was 7.1 and 7.5 last year, I’d said, it was not, nothing I have seen the structurally had change it from being moving up and I don’t see any difference being at 5.9. I think over 12-month period we are going to be at an average of 6.6, 6.7, something like that. And nothing, well, I have seen has change that from the economics right now.

Okay. Great. And then the recent acquisitions you have done, forgive me is I miss this in the press releases. But what range of EBITDA multiples are you seeing in that size transaction?

I would tell you that the ranges are anywhere from 5 to 11, I have to say that. Now, if you are telling me, of the acquisitions we have made, I would tell you they are in the 6 to 8 range.

6 to 8 range, that’s picked up versus a year ago when I think 4 to 6 you said, maybe in the statement?

Yes. Yes. It has. Yes. It has. But I would say it’s picked up by half a ton.

By half a ton, okay.

Yeah. But I would also say is, at 8 times it’s very accretive to do those transaction.

Right. Right. Yeah. Certainly the case. And then to switch over and I’ll move in different direction, the -- you mentioned some dealer supply contract that did not renew and also some leases that you cancelled? Could you give some color on what was going on those situations?

Yes. In the Getty transaction that we did in May two years ago, there was a provision that gave us the ability to give back around 18 or 25 over period of time and that was for us to digest the transaction, because it was 115 stations and the timing of what it was, we didn’t necessarily know exactly which would be good ones, which would be bad ones. So we put that provision in there, for us to be able to put back stations and so after digesting it for about a year, we have started to put back stations that are not economically plus to the company. So I would view those as being positive to the company and over the long-term. There was couple of supply contracts. Can third-party dealers tend to have 10-year supply contracts and they sometimes renew with us and most times they do and sometime they don’t, sometime they got out of business, sometime they look at their portfolio real estate and say, I would rather be selling it to somebody else, just like we do and we rational our portfolio. So there is nothing a strong trend that way at all…

But….

… it probably a net positive to supply contract.

Yeah. Okay. And then last question, one of the concern that some investors might have with your situation is the type of relationship and contracts with the privately held entity that you control and so I am a little concerned there could be a slight change in the management fee structure with the recent acquisition and particularly the change in the per gallon structure. I think, I understand a little bit of a change in the fixed fee. So if you could maybe comment on the logic behind that change in structure and how you think about that and how stable that management fee structure is going forward?

Yes. I can -- the rest assured I’d rather leave a dollar of income in the partnership than in that privately held company. It’s much more profitable to the partnership and to myself being over there. I would say that there are four drivers of that fixed fee increase. One is that we’ve significantly increased our systems. When we came out, we were about a 650 million gallons a company. And now we are going to be about a billion one. And so we needed to invest in systems that will take us to the next level, I would say up to $2 billion gallon level. And so there is a significant amount of investment that’s going into it. The second thing that happened was we brought in some services that we contracted for on the outside, so that only looks to mitigate the increase in cost going forward. So we brought in accounts, we brought in factors of different types of skills that were more appropriate to bring inside we feel. And the third piece was the PMI transaction is a significant transaction, almost 300 million gallons and because of the timing of the transaction, the way it came together in the last six weeks, we felt that we needed to be conservative with the management fee and that over time if we could earn, get synergies and efficiencies in it, that we would be able to not take the fees. So that’s the part of what my statement says, the LGC has the right not to take the management fees it’s not used and so we looked that in there as a kind of a hedge.

Okay. And then the change in structure to the, per gallons, so now you’ve got this $0.003 for wholesale, $0.015 retail versus, if I correctly, it was $0.5025 per gallon previously?

Previously, the partnership did not have any retail gallons in it. So there was no need for the fee. The fee of $0.015 is the fee that LGC charges LGO for its services. So we thought it was appropriate that that would be the fee that it would charge the PMI gallons that fit in retail.

I see. So the retail fee is effectively no change towards the internal structure was previously?

That’s correct.

And then the added flexibility in the fee for wholesale gallon?

I guess that recognizes the fact that going forward, it’s going to be $0.002 per gallon on incremental gallons because we are over the billion gallon mark. And so some of the costs efficient that I spoke to about bringing inside would mean that incremental gallons should be less costly as we go forward.

Okay. So actuality in reality that piece -- we should see decline on a per gallon basis?

Per gallon basis. Yes, that's correct.

Great. It was a lot of questions. Appreciate your candid answers. Thank you.

All good questions. Thank you.

(Operator Instructions) And our next question will come from the line of Bernie Colson with Oppenheimer. Please proceed.

Good Morning.

Good Morning.

Just to follow-up a little bit on what you see in the acquisition market, what do you attribute, kind of, the higher multiples over there? There are more parties bidding on the properties that you're looking at or is it the same and just willing to pay more and what's driving that?

I would say that’s the higher end of it was driven by ETP in the deals that we did not get. So, I think they were the primary driver of the higher end of the multiples. I think people are some buyers, are trying to take advantage of interest rates at the level that they are at to lock in some financing at this rate and buyers would be more aggressive there and are willing to sell for. So, I think it's a combination of -- there were some aggressive buyers out there, there are some interest rate risks that people were trying to lock in and I think buyers were asking for more. I don't think it’s an ever increasing trend. I’m pretty sure of it because of the two transactions that we did are market appropriate.

Okay. So, for ETP, you are not saying ETP is bidding on deals at same size that you are just that that was something that suffered deals out in the market and then?

No, I would say that we bided on the max deal in Baltimore, Washington and we were bidder on the deal in Nashville. So the Nashville deal was at the higher end of what we thought we’re going to do in the $75 million range, but something that would be accretive in the market down there. And the Max deal, the price that we’re paying for it would have been accretive to. So I guess they started at the lower end and it will jump into the $1.8 billion market. So yes, we did run up against them in a couple of transactions, but we may take our discipline as to what we’re willing to pay for assets.

Sure. And then, can you remind us again how much leverage you wanted to carry on like a sustainable basis?

I think from an enterprise value, we’re running about 40%, I think 50% is a level I get -- I think 50-50 would be the appropriate level on the high side before we raise more equity.

And kind of does that translate into the kind of debt-to-EBITDA I know, for debt-to-EBITDA, are those going to be -- the rate should be higher this quarter because the EBITDA was lower seasonally, but, I mean, are you comfortable at 4 times, 3.4 times, 3 times?

I would give you a range which says I would tell you on the high side I think 4.5, but on the low side I would like to get it back down to 275 and that we will manage within that range.

Okay.

I would not want to operate on the sustained basis at more than 4 times.

Great, okay. That’s all for me. Thanks.

Okay. Thank you.

And our next question comes from the line of T.J. Leverte with PCO Capital. Please proceed.

Joe, in light of some of the large transactions taking place in the industry, can you talk a little bit about the big picture for Lehigh Gas, where you’d like to see the company in terms of size the next two or three years? And then also, perhaps, you can talk about the current acquisition pipeline, obviously you just announced two significant acquisitions, but maybe you can talk about what’s left out there?

That is a couple of good questions. But the pipeline is still good. I mean, there is probably 8 to 9 deals that we are looking at. I would suspect that they probably would not occur anytime soon as we are digesting these two transactions, they are both quite significant transactions. But the deals are out there. And if it’s the right deal, we will go after it. I think regarding with the every deal that we announce brings two or three more out of the woodwork to find the sellers that want to talk to us because it expands the market that we are in. So I am quite optimistic. What was the first question, T.J.?

Just the multiyear opportunity for Lehigh Gas?

Yes. I think we would model it within ourselves, the $100 million to $150 million a year in acquisitions. I think that still gives us sweet spot of the multiple that we would like to play as they. If we come across an acquisition that like a Max that would have been accretive at a 7, 7.5 multiple, we are going to take a shot at, but I think we are quite comfortable doing the single and doubles at the $30 million to $70 million. And I think that could over three years -- yes that up, that’s $450 million on the high side of acquisitions and that could be up to -- that could get us to probably about a $1.6 billion, $1.7 billion in gallons from that standpoint of view.

Okay, great. Thanks.

At this time, we have no further questions in queue. I would like to turn the call over to Joe Topper for closing remarks.

Thank you all very much for your time and interest and your questions, they were quite good today. And look forward to having a very good quarter with you in August. Thanks. Take care.

Thank you for your participation in today’s conference. This concludes the presentation. You may all disconnect. Good day, everyone.