Susser Holdings Reports Second Quarter 2014 Results

CORPUS CHRISTI, Texas, Aug. 8, 2014 /PRNewswire/ -- Susser Holdings Corporation (NYSE: SUSS) today reported financial and operating results for the second quarter ended June 29, 2014.  Results detailed below include the results of Susser Petroleum Partners LP (NYSE: SUSP) unless otherwise noted.

Same-store merchandise sales increased 4.0 percent in the second quarter of 2014, which included the Easter holiday, versus growth of 2.2 percent in the second quarter of 2013.  Last year Easter fell in the first quarter.  Average retail gallons sold per store increased 2.0 percent, excluding the results of the recently acquired Sac-N-Pac™ stores, compared with growth of 5.5 percent a year earlier.  Including the Sac-N-Pac™ stores, average retail gallons per store declined 0.4 percent, due to Sac-N-Pac's smaller average store size and lower fuel volumes. Retail net merchandise margin was 33.8 percent, versus 34.3 percent in the second quarter of 2013.

Retail fuel margin before credit card expense averaged 18.7 cents per gallon, versus 18.2 cents last year.  That compares to an average second quarter retail fuel margin of 22.0 cents per gallon over the previous five years, calculated as if the 3-cent-per-gallon mark-up charged by Susser Petroleum Partners had been in place for the entire period.

Net income attributable to Susser Holdings was $12.3 million, or $0.56 per diluted share for the second quarter, versus a reported net loss of $4.3 million, or $0.20 per diluted share in the second quarter of 2013.  2014 results include the impact of $3.1 million of pre-tax charges related to the proposed merger with a subsidiary of Energy Transfer Partners, L.P. ("ETP"), and 2013 included the impact of a $26.2 million debt refinancing charge. Excluding these charges, adjusted net income for the second quarter of 2014 was $14.3 million, or $0.66 per diluted share, compared to $12.5 million, or $0.59 per diluted share in 2013.

Adjusted EBITDA⁽¹⁾ was $50.0 million, or $53.1 million excluding the ETP merger charges that are included in reported general and administrative expense, compared to $50.5 million a year ago. Consolidated gross profit totaled $192.7 million, a 14.7 percent increase versus last year, due to merchandise and fuel sales growth.

Second quarter consolidated revenues were $1.9 billion, up 19.7 percent from the second quarter of 2013.  This increase reflects a 15.8 percent increase in merchandise sales, a 15.0 percent increase in retail fuel sales and a 30.5 percent increase in wholesale fuel sales to third parties.

"As expected, same-store merchandise sales growth was strong, in part due to the contribution of the Easter holiday sales activity in the second quarter," said Sam L. Susser, Susser Chairman, President and Chief Executive Officer.   "Sales from our propriety Laredo Taco Company^® restaurant concept continue to be a strong driver of same-store performance.

"Average retail gallons per store performance was softer in the quarter after two years of very strong growth.  This was due in part to short-term fuel shortages in certain markets caused by refinery shutdowns and transportation capacity issues that have since improved.  Rising fuel costs and additional competitor site openings also impacted fuel volumes and profitability.

"We have a record 17 new Stripes® stores under construction that should be open by year-end, and we are on track to complete our previously announced merger with Dallas-based ETP in the third quarter of this year. We are off to a very strong start in July, giving us excellent momentum as we prepare to merge with ETP." Susser said.

New Convenience Store and Wholesale Business Update

Susser Holdings opened five new large-format Stripes® convenience stores and acquired two existing stores during the second quarter.  As of June 29, the Company operated 636 convenience stores, of which 408 included a restaurant, primarily Laredo Taco Company®.  Year-to-date, the Company has opened 11 new-build stores and acquired 49 existing stores, including 47 Sac-N-Pac™ locations.  Four of these stores opened since the end of the second quarter, and 17 new Stripes® stores are currently under construction.

In the wholesale segment, 11 new contracted sites were added in the second quarter and three sites were discontinued for a total of 624 contracted branded sites as of June 29. Year-to-date, the company has added 38 sites and discontinued five, including the 19 dealer sites acquired in connection with the Sac-N-Pac acquisition. Susser expects to add a total of 50 to 65 new wholesale branded dealers and consignment sites for the full year.

Susser Holdings consolidated capital spending was $67.9 million for the second quarter, including $36.7 million at SUSP.  We completed sale leaseback transactions with SUSP for six new Stripes locations in the second quarter for a total cost of $31.0 million, and have completed three additional sale leasebacks to date during the third quarter, bringing the year-to-date total to 16 sites for a total of $70.7 million.

Susser Petroleum Partners Declares First IDR Payment

Effective with the second quarter distribution by Susser Petroleum Partners of $0.5197 per unit, Susser Holdings - which owns SUSP's general partner, 50.2 percent of SUSP units and all of its incentive distribution rights (IDRs) - will receive its first IDR payment of approximately $64,000 at the end of August, in addition to its share of distribution to common and subordinated units for the second quarter.

Second Quarter Financial and Operating Highlights

Merchandise - Merchandise sales were $318.2 million, a 15.8 percent increase from a year ago.  Approximately $11.0 million of the increase came from stores that have been open a year or longer, the remaining increase came from 75 stores that were opened or acquired during the last four quarters.  Same-store merchandise sales rose 4.0 percent, versus 2.2 percent in the second quarter of last year. Sales from food service, beer and packaged drinks were the primary drivers of merchandise sales growth.

Net merchandise margin as a percentage of sales was 33.8 percent, versus 34.3 percent a year earlier.    Merchandise gross profit increased 14.4 percent year-over-year to $107.7 million.  Gross profit growth was led by an $11.5 million contribution from new stores and a $1.1 million same-store increase from food service.

Retail Fuel - Retail fuel volumes grew 11.8 percent from a year ago to 263.9 million gallons.  Average gallons sold per store were approximately 32,400 gallons per week, a decline of 0.4 percent.  Excluding the impact from the recently acquired Sac-N-Pac stores, retail fuel sales increased 2.0 percent year-over-year.  Retail fuel revenues increased 15.0 percent from a year ago to $926.7 million as a result of increased gallons sold as well as a 2.9 percent - or 10-cent-per-gallon - increase in the average selling price of fuel.

Retail fuel gross margin averaged 18.7 cents per gallon, versus 18.2 cents per gallon a year ago.  After deducting credit card expense, net fuel margin was 12.8 cents per gallon, versus 12.7 cents in the prior-year period.  Retail fuel gross profit increased 15.1 percent year-over-year to $49.5 million as a result of the higher volumes sold and higher profit margin per gallon.

Wholesale Fuel - Susser's wholesale segment includes all of SUSP's operations along with the consignment sales and transportation businesses that were not contributed to SUSP in the IPO in September 2012.  Wholesale fuel volumes sold to third parties - which includes all gallons except those distributed to Susser's retail stores - were up 27.5 percent from a year ago to 199.1 million gallons. Wholesale fuel revenues increased 30.5 percent to $614.7 million versus a year ago.  This increase reflects the impact of higher volumes sold as well as a 2.3 percent - or 7-cent-per-gallon - increase in the selling price of fuel compared with the second quarter of last year.

Wholesale fuel gross margin from third parties was 6.5 cents per gallon, up from 6.4 cents a year earlier.  Wholesale fuel gross profit, including sales to Stripes and Sac-N-Pac stores, increased 21.2 percent year-over-year to $20.7 million.  This increase was mainly the result of increased gallons sold, including the impact of the Gainesville Fuel acquisition completed in September 2013, and a 0.4 percent increase in third-party margin per gallon.

Second Quarter Earnings Conference Call

Susser's management team will hold a conference call today at 11:00 a.m. ET (10:00 a.m. CT) to discuss second quarter 2014 results for both Susser Holdings Corporation and Susser Petroleum Partners LP. To participate in the call, dial 719-457-2689 10 minutes early and ask for the Susser conference call. The call will also be accessible live and for later replay via webcast in the Investor Relations section of Susser Holdings' web site at www.susser.com and Susser Petroleum Partners' web site at www.susserpetroleumpartners.com under Events and Presentations.  A telephone replay will be available through August 15 by calling 719-457-0820 and using the access code 5051315#.

Susser Holdings Corporation is a third-generation family led business based in Corpus Christi, Texas that operates approximately 640 convenience stores in Texas, New Mexico and Oklahoma under the Stripes® and Sac-N-Pac™ banners. Restaurant service is available in approximately 410 of its stores, primarily under the proprietary Laredo Taco Company® brand. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum Partners LP, which distributes approximately 1.7 billion gallons of motor fuel annually to Stripes® stores, independently operated consignment locations, convenience stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma, Kansas and Louisiana.

Forward-Looking Statements

This news release contains "forward-looking statements" which may describe Susser's objectives, expected results of operations, targets, plans, strategies, costs, anticipated capital expenditures, potential acquisitions, new store openings and/or new dealer locations, management's expectations, beliefs or goals regarding the proposed merger with ETP and SUSS and the expected timing of the merger.  These statements are based on current plans, expectations and projections and involve a number of risks and uncertainties that could cause actual results and events to vary materially, including but not limited to: competitive pressures from convenience stores, gasoline stations, other non-traditional retailers located in our markets and other wholesale fuel distributors; dangers inherent in storing and transporting motor fuel; pending or future consumer or other litigation or adverse publicity concerning food quality, food safety or other health concerns related to our restaurant facilities; inability to build or acquire and successfully integrate new stores; volatility in crude oil and wholesale petroleum costs; increasing consumer preferences for alternative motor fuels, or improvements in fuel efficiency;  general economic, financial and political conditions; our dependence on our subsidiaries for cash flow generation, including SUSP, and our exposure to the business risks of SUSP by virtue of our controlling ownership interest; operational limitations imposed by our contractual arrangements with SUSP; our ability to comply with federal and state regulations including those related to alcohol, tobacco and environmental matters; wholesale cost increases of tobacco products or future legislation or campaigns to discourage smoking; costs associated with employee healthcare requirements; compliance with, or changes in, tax laws-including those impacting the tax treatment of SUSP; dependence on two principal suppliers for merchandise; dependence on suppliers for credit terms; seasonality; dependence on senior management and the ability to attract qualified employees; acts of war and terrorism; dependence on our information technology systems; severe weather; severe or unfavorable weather conditions; cross-border risks associated with the concentration of our stores in markets bordering Mexico; impairment of goodwill or indefinite lived assets; and Susser and ETP's ability to consummate the proposed merger; including the ability to obtain requisite shareholder approvals or to satisfy other conditions precedent to the consummation of the merger.

For a full discussion of these and other risks and uncertainties, refer to the "Risk Factors" section of the Company's most recently filed annual report on Form 10-K and subsequent quarterly filings.  These forward-looking statements are based on and include our estimates as of the date hereof. Subsequent events and market developments could cause our estimates to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if new information becomes available, except as may be required by applicable law.

Financial statements follow

SOURCE Susser Holdings Corporation