Organization and Basis of Presentation

3 Months Ended

Mar. 31, 2013

Organization and Basis of Presentation

Organization and Basis of Presentation

1. Organization and Basis of Presentation

The unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2013, are comprised of the Partnership which is a Delaware master limited partnership, and the Partnership’s wholly-owned subsidiaries. The Partnership was formed in December 2011 by Lehigh Gas GP LLC, a Delaware limited liability corporation, also formed in December 2011, to act as the General Partner to the Partnership. The Partnership engages in the wholesale distribution of motor fuels, consisting primarily of gasoline and diesel fuels, and owns and leases real estate used in the retail distribution of motor fuels.

References to the unaudited condensed combined financial statements to “the Predecessor” or “Predecessor Entity” refer to the portion of the business of Lehigh Gas Corporation (“LGC”) and its subsidiaries and affiliates under common control (Energy Realty OP LP, EROP-Ohio Holdings, LLC, Lehigh-Kimber Petroleum Corporation, Lehigh-Kimber Realty, LLC, Kwik Pik-Ohio LLC and Kwik Pik Realty-Ohio LLC, which are collectively referred to as the “Lehigh Gas Entities”) that were contributed to the Partnership in connection with the Offering (the “Contributed Assets”). All of the Contributed Assets were recorded at historical cost as this transaction was considered to be a reorganization of entities under common control. The Partnership issued Common Units and Subordinated Units to the shareholders, or their assigns, of the Predecessor Entity in consideration of their transfer of the Contributed Assets to the Partnership.

Accordingly, the accompanying unaudited condensed consolidated and combined financial statements are presented in accordance with SEC requirements for predecessor financial statements, which include the financial results of both the Partnership and the Predecessor Entity. The results of operations contained in the unaudited condensed financial statements include the Partnership’s consolidated financial results for the three months ended March 31, 2013 and the Predecessor Entity’s combined financial results for the three months ended March 31, 2012. The unaudited condensed consolidated balance sheets present the financial position of the Partnership as of March 31, 2013, and December 31, 2012.

The unaudited condensed consolidated financial statements include the accounts of the Partnership and all of its subsidiaries. The Partnership’s operations are principally conducted by the following consolidated wholly owned subsidiaries:

· Lehigh Gas Wholesale, LLC (“LGW”), a Delaware limited liability company, which distributes motor fuels;

· LGP Realty Holdings, LP (“LGPR”), a Delaware limited partnership, which functions as the property holding company of the Partnership; and,

· Lehigh Gas Wholesale Services, Inc. (“LGWS”), a Delaware corporation, which owns and leases (or leases and sub-leases) real estate and personal property, used in the retail distribution of motor fuels as well as provides maintenance and other services to lessee dealers and other customers (including Lehigh Gas Ohio LLC (“LGO”)).

As a result of the contribution of the Contributed Assets in connection with the Offering, the Partnership is engaged in substantially the same business and revenue generating activities as the Predecessor Entity, principally: (i) distributing motor fuels (using unrelated third-party transportation services providers)—on a wholesale basis to sub-wholesalers, independent dealers, lessee dealers, LGO, and others, and (ii) owning or leasing locations and, in turn, generating rental income from the lease or subleases of the locations to third-parties or LGO.

Interim Financial Statements

The accompanying interim condensed Partnership consolidated and Predecessor combined financial statements and related disclosures are unaudited and have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) on the same basis as the corresponding audited consolidated and combined financial statements for the year ended December 31, 2012, and, in the opinion of management, include all adjustments of a normal recurring nature considered necessary to present fairly the Partnership’s financial position as of March 31, 2013, and the results of its operations, and cash flows for the periods presented. Operating results for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, or any other future periods. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted under the SEC’s rules and regulations for interim financial statements. These unaudited condensed consolidated and combined financial statements should be read in conjunction with the corresponding audited Partnership consolidated and Predecessor combined financial statements and accompanying notes for the year ended December 31, 2012, included in our Annual Report on Form 10-K, filed with the SEC on March 28, 2013.

Significant Accounting Policies

The Partnership and the Predecessor Entity’s significant accounting policies are disclosed in the audited consolidated and combined financial statements for the year ended December 31, 2012, included in our Annual Report on Form 10-K filed with the SEC on March 28, 2013. Since the date of those financial statements, there have been no changes to the Partnership’s significant accounting policies.

Revenue Recognition

Revenues from wholesale fuel sales are recognized when fuel is delivered to the customer. Revenue from leasing arrangements in which the Partnership or Predecessor Entity is the Lessor is recognized ratably over the term of the underlying lease.

The amounts recorded for bad debts are generally based upon a specific analysis of aged accounts while also factoring in any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular customers. Bad debt provisions are included in selling, general and administrative expenses.

The following table presents the Partnership and the Predecessor Entity’s products as a percentage of total sales for the following periods:

	Lehigh GasPartners LPConsolidated for theThree MonthsEndedMarch 31, 2013		Lehigh GasEntities(Predecessor)Combinedfor theThree MonthsEndedMarch 31, 2012
Gasoline	93.2	%	93.6	%
Diesel fuel	6.6	%	6.3	%
Other	0.2	%	0.1	%
Total	100.0	%	100.0	%

Cost of Revenues from Fuel Sales

The Partnership and the Predecessor Entity include all costs incurred to acquire wholesale fuel, including the costs of purchasing and transporting inventory to the wholesale customers, in the cost of revenue from fuel sales. Cost of revenues from fuel sales does not include any depreciation of property and equipment. Depreciation is separately classified in the statements of operations. Total cost of revenues from fuel sales of suppliers who accounted for 10% or more of total cost of revenues from fuel sales for the periods presented are as follows:

	Lehigh Gas Partners LPConsolidatedfor theThree Months EndedMarch 31, 2013		Lehigh Gas Entities(Predecessor)Combinedfor theThree Months EndedMarch 31, 2012
ExxonMobil	42.0	%	40.1	%
Motiva Enterprises	13.8	%	22.1	%
BP Products	26.6	%	22.6	%

Comprehensive Income

The Partnership has no transactions which affect comprehensive income and, accordingly, comprehensive income (loss) equals net income (loss) for all periods presented.