Susser Holdings Corp. reported financial and operating results for the second quarter ended June 29, 2014. Results detailed below include the results of Susser Petroleum Partners LP unless otherwise noted.
Same-store merchandise sales increased 4% in the second quarter of 2014, which included the Easter holiday, versus growth of 2.2% in the second quarter of 2013.
Last year Easter fell in the first quarter. Average retail gallons sold per store increased 2%, excluding the results of the recently acquired Sac-N-Pac stores, compared with growth of 5.5% a year earlier. Including the Sac-N-Pac stores, average retail gallons per store declined 0.4%, due to Sac-N-Pac’s smaller average store size and lower fuel volumes. Retail net merchandise margin was 33.8%, versus 34.3% 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 three-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 was $50 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% increase versus last year, due to merchandise and fuel sales growth.
Second quarter consolidated revenues were $1.9 billion, up 19.7% from the second quarter of 2013. This increase reflects a 15.8% increase in merchandise sales, a 15% increase in retail fuel sales and a 30.5% 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 Susser, Susser chairman, president and CEO. “Sales from our propriety Laredo Taco Co. 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 Co. 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 50-65 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% 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% 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%, versus 2.2% 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%, versus 34.3% a year earlier. Merchandise gross profit increased 14.4% 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% 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%. Excluding the impact from the recently acquired Sac-N-Pac stores, retail fuel sales increased 2% year-over-year. Retail fuel revenues increased 15% from a year ago to $926.7 million as a result of increased gallons sold as well as a 2.9%—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% 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% from a year ago to 199.1 million gallons. Wholesale fuel revenues increased 30.5% to $614.7 million versus a year ago. This increase reflects the impact of higher volumes sold as well as a 2.3%—or seven-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% 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% increase in third-party margin per gallon.
Susser Holdings Corp., based in Corpus Christi, Texas, operates approximately 640 convenience stores in Texas, New Mexico and Oklahoma under the Stripes and Sac-N-Pac banners.