CORPUS CHRISTI, Texas, May 7 /PRNewswire-FirstCall/ -- Susser Holdings Corporation today reported that its total first quarter 2008 merchandise sales -- including a full-quarter's contribution from Town & Country Food Stores -- increased 80.8 percent to $168.8 million, versus $93.4 million a year earlier for the stand-alone Susser operation. On a same-store basis, merchandise sales increased 8.2 percent from the first quarter of 2007.
Total revenues for the combined organization increased 89.3 percent to a record $1 billion, from $528.6 million in the first quarter of 2007. Gross profit increased 74.7 percent to $91.5 million, compared with $52.4 million in the year-ago quarter from stand-alone Susser operations.
Adjusted EBITDA(1) increased 113.2 percent to $16.6 million, compared with $7.8 million in the prior year's first quarter, reflecting the Town & Country contribution along with the strongest quarterly merchandise margin in over six years of 33.6 percent.
The Company recorded a first quarter net loss of $3.4 million, or $0.20 per diluted share, versus a net loss of $2.4 million, or $0.14 per diluted share, in the year-earlier quarter. Net income was impacted by slightly lower gross profit from retail fuel sales, increased credit card expense and higher interest expense related to the fourth quarter 2007 acquisition of Town & Country.
To show more comparable results, Susser is providing selected pro forma financial results as if the Town & Country acquisition had taken place on January 1, 2007. On a pro forma(2) basis, Susser would have reported a net loss of $2.5 million, or $0.15 per diluted share, for the first quarter of 2007 and adjusted EBITDA(1) of $17.2 million.
"Our above-average same-store sales growth and our increased merchandise margin of 33.6 percent in the first quarter demonstrate that our primary markets in South and West Texas are not seeing the kind of economic slowdown that has impacted other parts of the country," said Sam L. Susser, President and Chief Executive Officer.
"In fact, although rising oil and refined product prices are putting pressure on the broader economy -- and putting pressure on our retail fuel margins and credit card fees -- our oilpatch markets in West and Southeast Texas and Southern Oklahoma are seeing a boost in economic activity from higher energy prices," Susser said.
"We will, however, remain vigilant as we look for any sign of a consumer slowdown, and we intend to manage our business and our capital outlays prudently and conservatively," Susser said.
"We remain on track with our integration program for Town & Country, and we are pleased with the performance of those stores in West Texas and Eastern New Mexico since we closed the transaction last November. We are starting to see improvement in our merchandise margins from improved supply contracts and in-store merchandising efforts, and we continue to look for additional opportunities for savings.
"We also have just started the final phase of our systems integration, which should be completed this quarter and allow us to complete our corporate personnel reductions and relocations as planned this summer," he said.
New Convenience Store/Wholesale Dealer Site Update
During the first quarter of 2008, the Company opened three new retail units, bringing the company's total store count to 507 as of March 30. One additional store opened on May 1, and four more stores are under construction or under contract for purchase. In addition to the three new restaurants opened in the new stores, the Company opened restaurants in one existing store and closed one, bringing the total number of stores with restaurant operations to 285, or 56 percent of all stores at the end of the first quarter.
In its wholesale operations, Susser added two new dealer sites and discontinued six during the first quarter, for a total of 383 dealer sites in operation at March 30. New sites typically outperform wholesale locations that are closed or where fuel supply is discontinued.
Financing Update
Sale/Leasebacks -- Subsequent to the end of the first quarter, Susser Holdings completed sale/leaseback transactions totaling $19.6 million for seven retail stores. These latest transactions bring total proceeds from sale/leasebacks year-to-date to $26.5 million. Susser also has recently received, subject to customary conditions, commitments for up to an additional $45 million of sale/leaseback funding for the remainder of 2008.
Revolving Credit Facility -- Also in early May, Susser increased its revolving credit facility from $90 million to $120 million. This increase will provide Susser with additional liquidity and flexibility in the face of rising working capital requirements due to sharply higher motor fuel prices. The Company remains in full compliance with all of its covenants relating to its indebtedness. As of May 6, the Company's borrowing base supported the use of approximately $105 million of the $120 million revolver, and there was approximately $62 million of availability. The Company remains comfortable with its current liquidity position.
Integration Highlights
Over the past few months, the Company has achieved many milestones in the integration of Town & Country:
-- Announced and is currently implementing a streamlined management structure -- Achieved purchasing synergies on numerous supply agreements -- In the process of consolidating food purchasing and distribution with Stripes' suppliers -- Completed implementation of its Human Resources Information System and improved store staffing -- Remerchandised stores and have added a number of new products to increase sales and profitability First Quarter Financial and Operating Highlights
Convenience store merchandise sales totaled $168.8 million during the first quarter, an increase of 80.8 percent on a reported basis and 13.8 percent on a pro forma basis. Same-store merchandise sales for Stripes locations alone increased 8.2 percent from the year-earlier quarter and 8.4 percent on a pro forma basis. The strong growth in sales for the retail merchandise segment was led primarily by increases in packaged drinks, cigarettes, beer and food service. Sales trends also benefited from a favorable weather comparison.
Total merchandise gross profit for the first quarter, net of shortages, totaled $56.7 million, an increase of 89.1 percent on a reported basis and 17.1 percent on a pro forma basis.
Net merchandise margin on a combined store basis increased to 33.6 percent for the first quarter of 2008 - an increase of approximately 150 basis points on a reported basis and 100 basis points on a pro forma basis.
Retail fuel volumes increased to 169.3 million gallons for the quarter, up 66.3 percent on a reported basis and 8.2 percent on a pro forma basis. Average gallons sold per retail location increased 7.2 percent from a year ago on a reported basis and 4.6 percent on a pro forma basis. The favorable per- store comparison is in part due to the re-branding of the Company's fuel islands to the Valero brand during the year-earlier quarter as well as strong overall customer traffic.
Retail fuel revenues increased to $519.8 million, up 131.3 percent on a reported basis and 47.1 percent on a pro forma basis. Fuel revenues were driven by the Town & Country contribution, higher Stripes volumes and an 86 cent-per-gallon increase in the retail price of fuel versus a year ago, or 81 cents on a pro forma basis.
Gross margins for fuel were flat at 11.9 cents per gallon on a reported basis but down from a pro forma 13.7 cents per gallon a year ago, reflecting strong first quarter 2007 margins in Town & Country's West Texas markets. Retail fuel gross profit was $20.2 million, an increase of 66.7 percent on a reported basis and a decrease of 5.6 percent on a pro forma basis. (Note that Susser reports retail fuel margins before credit card and other fuel-related expenses.)
Wholesale fuel volumes sold to Susser's 383 dealers and other third-party customers increased 2.3 percent year-over-year to 114.1 million gallons. Wholesale fuel revenues increased 48.0 percent to $302.6 million as a result of both the volume increase and an 82 cent-per-gallon increase in average wholesale fuel selling prices. Wholesale fuel gross margin was 4.9 cents per gallon, versus 3.8 cents per gallon a year earlier. Wholesale fuel gross profit increased 30.0 percent to $5.6 million, reflecting higher wholesale fuel selling prices and the slightly higher volumes.
2008 Guidance
The Company has reaffirmed its previous guidance for 2008, with the exception of a reduction in its estimated range for new retail stores to 12-18 stores and a commensurate reduction in capital spending ranges:
2007 2007 2008 2008 Full-Year Full-Year Full-Year First Quarter Actual Pro Guidance Results Results Forma(d) Merchandise Same-Store Sales Growth 4.5%-6.0% (a) 8.2% (a) 7.7% (a) 8.6% Merchandise Margin, Net of Shortage 32.0%-34.0% 33.6% 32.5% 32.4% Retail Average Per-Store Gallons Growth 2.0%-6.0% 7.2% 5.9% 3.7% Retail Fuel Margins (cents/gallon) 12.5-16.0 11.9 14.7 17.0 Wholesale Fuel Margins (cents/gallon) 4.0-5.5 4.9 5.3 New Retail Stores 12-18 (b) 3 18 (b) New Wholesale Dealer Sites 25-35 (b) 2 30 (b) Gross Capital Spending $65-$95 million $15.2 million $89.8 million (c) Net Capital Spending $25-$40 million $8.3 million $42.7 million (c) (a) We include a store in the same-store sales base in its 13th month of our operation; therefore, Town & Country stores will be excluded from our same-store sales base until December 2008. (b) 2007 retail store actual does not include 168 Town & Country locations acquired in November 2007. Numbers for both years do not reflect existing retail or wholesale store closures, which are typically much lower volume locations than new sites. (c) Excludes acquisition of Town & Country Food Stores and $51.2 million of net proceeds from sale/leaseback of Town & Country properties concurrent with the acquisition. (d) Pro forma results as if Town & Country had been included in the Company's operations for all of 2007. (1) Adjusted EBITDA is a non-GAAP financial measure of performance and liquidity that has limitations and should not be considered as a substitute for net income or cash provided by (used in) operating activities. Please refer to the discussion and tables under "Reconciliations of Non-GAAP Measures" at the end of this news release for a discussion of our use of adjusted EBITDA and a reconciliation to net income and cash provided by operating activities for the periods presented. (2) Pro forma numbers are adjusted to show results as if the November 13, 2007 Town & Country acquisition had occurred at the beginning of fiscal 2007. See the Pro Forma Condensed Consolidated Statements of Operations in this earnings release. Investor Conference Call and Webcast
Susser's management team will hold a conference call on Thursday, May 8, at 11 a.m. EDT (10 a.m. CDT) to discuss first quarter results. To participate in the call, dial (303) 262-2143 at least 10 minutes early and ask for the Susser conference call. A replay will be available approximately two hours after the call ends and will be accessible through May 15. To access the replay, dial (303) 590-3000 and enter the pass code 11112600#.
The conference call will also be accessible via Susser's Web site at http://www.susser.com/. To listen to the live call, please visit the Investor Relations page of Susser's Web site at least 10 minutes early to register and download any necessary software. An archive will be available shortly after the call for approximately 60 days.
About Susser Holdings Corporation
Corpus Christi, Texas-based Susser Holdings Corporation is a third generation family led business that currently operates more than 505 convenience stores in Texas, New Mexico and Oklahoma under the Stripes and Town & Country banners. Restaurant service is available in 285 of its stores, primarily under the proprietary Laredo Taco Company and Country Cookin' brands. The Company also supplies branded motor fuel to more than 380 independent dealers through its wholesale fuel division.
Forward-Looking Statements
This news release contains "forward-looking statements" describing Susser's objectives, targets, plans, strategies, costs, anticipated capital expenditures, expected cost savings, costs of our store re-branding initiatives, expansion of our food service offerings, potential acquisitions and new store openings and dealer locations. These statements are based on current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially, including but not limited to: competition from other convenience stores, gasoline stations, dollar stores, drug stores, supermarkets, hypermarkets and other wholesale fuel distributors; changes in economic conditions; volatility in energy prices; successful integration and anticipated future financial performance and trends of Town & Country; political conditions in key crude oil producing regions; wholesale cost increases of tobacco products; adverse publicity concerning food quality, food safety or other health concerns related to our restaurant facilities; consumer or other litigation; consumer behavior, travel and tourism trends; devaluation of the Mexican peso or restrictions on access of Mexican citizens to the U.S.; unfavorable weather conditions; changes in state and federal regulations; dependence on one principal supplier for merchandise, two principal suppliers for gasoline and one principal provider for transportation of substantially all of our motor fuel; financial leverage and debt covenants; changes in debt ratings; inability to identify, acquire and integrate new stores; dependence on senior management; acts of war and terrorism; and other unforeseen factors. For a full discussion of these and other risks and uncertainties, refer to the "Risk Factors" section of the Company's annual report on Form 10-K for the year ended December 30, 2007. 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 Susser Holdings Corporation Consolidated Statements of Operations Unaudited Three Months Ended April 1, March 30, 2007 2008 (in thousands, except per share amounts) Revenues: Merchandise sales $93,365 $168,771 Motor fuel sales 429,115 822,392 Other income 6,170 9,543 Total revenues 528,650 1,000,706 Cost of sales: Merchandise 63,405 112,103 Motor fuel 412,726 796,640 Other 124 440 Total cost of sales 476,255 909,183 Gross profit 52,395 91,523 Operating expenses: Personnel 18,254 30,297 General and administrative 6,225 9,063 Other operating 14,690 27,946 Rent 6,014 8,411 Royalties 66 - Loss on disposal of assets and impairment charge 15 98 Depreciation, amortization, and accretion 6,351 10,736 Total operating expenses 51,615 86,551 Income from operations 780 4,972 Other income (expense): Interest expense, net (3,010) (9,862) Other miscellaneous 105 158 Total other income (expense) (2,905) (9,704) Minority interest in loss of consolidated subsidiaries (16) (12) Income before income taxes $ (2,141) $(4,744) Income tax (expense) benefit (260) 1,384 Net loss $ (2,401) $(3,360) Net loss per share: Basic $(0.14) $(0.20) Diluted $(0.14) $(0.20) Weighted average shares outstanding: Basic 16,705,404 16,880,404 Diluted 16,705,404 16,880,404 Susser Holdings Corporation Consolidated Balance Sheets December 30, March 30, 2007 2008 audited unaudited Assets (in thousands) Current assets: Cash and cash equivalents $7,831 $13,813 Accounts receivable, net of allowance for doubtful accounts of $1,360 at December 30, 2007 and $1,421 at March 30, 2008 69,368 72,077 Inventories, net 69,577 71,756 Assets held for sale 903 903 Other current assets 8,209 8,131 Total current assets 155,888 166,680 Property and equipment, net 410,745 413,096 Other assets: Goodwill 248,809 248,809 Intangible assets, net 25,497 24,414 Other noncurrent assets 12,753 12,691 Total other assets 287,059 285,914 Total assets $853,692 $865,690 Liabilities and shareholders' equity Current liabilities: Accounts payable $127,756 $128,306 Accrued expenses and other current liabilities 39,406 39,255 Current maturities of long-term debt 3,937 5,250 Deferred purchase price - TCFS acquisition, current 10,000 10,000 Total current liabilities 181,099 182,811 Long-term debt 374,754 373,327 Revolving line of credit 34,640 45,430 Deferred gain, long-term portion 31,511 35,486 Deferred tax liability, long-term portion 27,145 24,909 Other noncurrent liabilities 20,068 21,761 Total long-term liabilities 488,118 500,913 Minority interests in consolidated subsidiaries 684 695 Commitments and contingencies Shareholders' equity: Common stock, $.01 par value; 125,000,000 shares authorized; 17,006,662 issued and 16,995,338 outstanding as of December 30, 2007; 17,036,662 issued and 17,025,338 outstanding as of March 30, 2008 170 170 Additional paid-in capital 172,765 173,605 Retained earnings 10,856 7,496 Total shareholders' equity 183,791 181,271 Total liabilities and shareholders' equity $853,692 $865,690 Pro Forma Results of Operations
The following table presents the quarterly and annual 2007 results of operations, on a pro forma basis for Susser Holdings Corporation as if the acquisition of Town & Country had occurred on January 1, 2007. We are presenting this unaudited information to provide a basis for comparison against our actual 2008 results, due the significant impact of the TCFS Acquisition on our operating results.
Twelve Months Ended Three Months Ended (1) December April 1, July 1, September 30, December 30, 30, 2007 2007 2007 2007 2007 (in thousands, except share data) Revenues: Merchandise sales $148,368 $166,705 $171,450 $166,509 $653,032 Motor fuel sales 560,903 752,274 738,036 765,027 2,816,240 Other income 9,017 8,758 8,740 8,671 35,186 Total revenues 718,288 927,737 918,226 940,207 3,504,458 Cost of sales: Merchandise (2) 99,987 112,406 114,637 114,262 441,292 Motor fuel (2) 534,971 714,783 698,298 731,240 2,679,292 Other 579 771 593 518 2,461 Total cost of sales 635,537 827,960 813,528 846,020 3,123,045 Gross profit 82,751 99,777 104,698 94,187 381,413 Operating expenses: Personnel 27,069 28,692 29,230 29,253 114,244 General and administrative 8,134 7,963 9,286 11,058 36,441 Other operating 23,483 26,814 27,708 24,428 102,433 Rent (3) 7,417 7,524 7,549 8,355 30,845 Royalties 66 - - - 66 (Gain) loss on disposal of assets and impairment charge 16 (221) 271 116 182 Depreciation, amortization, and accretion (4) 9,661 10,383 11,446 9,481 40,971 Total operating expenses 75,846 81,155 85,490 82,691 325,182 Income from operations 6,905 18,622 19,208 11,496 56,231 Other income (expense): Interest expense, net (5) (10,267) (10,197) (10,196) (11,257) (41,917) Other miscellaneous 105 91 123 116 435 Total other income (expense) (10,162) (10,106) (10,073) (11,141) (41,482) Minority interest in income (loss) of consolidated subsidiaries (16) (18) - (10) (44) Income (loss) before income taxes (3,273) 8,498 9,135 345 14,705 Income tax expense (benefit) (6) 767 (3,355) (3,603) (417) (6,608) Net income (loss) $(2,506) $5,143 $5,532 $ (72) $ 8,097 Net income (loss) per share: Basic $ (0.15) $0.31 $0.33 $0.00 $0.48 Diluted $ (0.15) $0.31 $0.33 $0.00 $0.48 Weighted average shares outstanding: Basic 16,705,404 16,705,404 16,705,404 16,822,071 16,734,571 Diluted 16,705,404 16,766,204 16,776,347 17,017,075 16,817,417 Twelve Months Ended Three Months Ended (1) December April 1, July 1, September 30, December 30, 30, 2007 2007 2007 2007 2007 Merchandise gross profit, net 32.6% 32.6% 33.1% 31.4% 32.4% Gallons: Retail 156,467 163,803 169,498 167,447 657,215 Wholesale 113,027 120,152 120,249 116,850 470,278 Motor fuel margin (cents per gallon): Retail 13.67 cents 18.83 cents 18.90 cents 16.27 cents 16.97 cents Wholesale 4.02 cents 5.53 cents 6.40 cents 5.60 cents 5.41 cents (1) Town & Country's historical monthly results have been aggregated to correspond to our fiscal quarters, which differ from Town & Country's historical fiscal quarters, to more accurately reflect the combined quarterly seasonal trends on a pro forma basis. Therefore, this presentation varies slightly from the Pro Forma Condensed Consolidated Statements of Operations included in Note 4 of our Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 30, 2007, as that presentation was based on Town & Country's audited financial statements for the fiscal year ended November 3, 2007, as adjusted. Certain pro forma adjustments related to the TCFS Acquisition have been made, as further described in the following notes, which are consistent with our pro forma presentation in our referenced Note 4. (2) Cost of sales has been adjusted to eliminate the impact of the use of the LIFO inventory method by Town & Country. (3) Includes additional rent expense to reflect the $51.2 million sale/leaseback of Town & Country assets completed concurrent with the TCFS Acquisition. (4) Reflects the effects on depreciation from the valuation of Town & Country assets to fair market value and the sale/leaseback transaction. (5) Reflects the net increase in interest expense resulting from the issuance of the $105 million term loan and $150 million senior notes, along with amortization of issuance costs, and eliminates interest expense related to Town & Country debt which was paid off or defeased. (6) Income tax expense was calculated at a 36% effective rate on pre-tax income, plus the Texas margin tax at 0.5% of gross margin. This calculation of pro forma income tax eliminates the effects of our release of a tax valuation allowance during 2007, of which the final $6.6 million was released in fourth quarter 2007. The TCFS Acquisition changed our tax position, and therefore this pro forma presentation will be more comparable to our 2008 income tax expense. Reconciliations of Non-GAAP Measures to GAAP Measures
We define EBITDA as net income before net interest expense, income taxes and depreciation, amortization and accretion. Adjusted EBITDA further adjusts EBITDA by excluding cumulative effect of changes in accounting principles, discontinued operations, non-cash stock-based compensation expense and certain other operating expenses that are reflected in our net income that we do not believe are indicative of our ongoing core operations, such as significant non-recurring transaction expenses and the gain or loss on disposal of assets and impairment charges. Adjusted EBITDAR adds back rent to adjusted EBITDA. In addition, those expenses that we have excluded from our presentation of adjusted EBITDA and adjusted EBITDAR are also excluded in measuring our covenants under our revolving credit facility and the indenture governing our senior notes.
We believe that adjusted EBITDA and adjusted EBITDAR are useful to investors in evaluating our operating performance because:
-- they are used as a performance and liquidity measure under our subsidiaries' revolving credit facility and the indenture governing our senior notes, including for purposes of determining whether they have satisfied certain financial performance maintenance covenants and our ability to borrow additional indebtedness and pay dividends to us; -- securities analysts and other interested parties use them as a measure of financial performance and debt service capabilities; -- they facilitate management's ability to measure operating performance of our business because they assist us in comparing our operating performance on a consistent basis since they remove the impact of items not directly resulting from our retail convenience stores and wholesale motor fuel distribution operations; -- they are used by our management for internal planning purposes, including aspects of our consolidated operating budget, capital expenditures, as well as for segment and individual site operating targets; and -- they are used by our board of directors and management for determining certain management compensation targets and thresholds.
EBITDA, adjusted EBITDA and adjusted EBITDAR are not recognized terms under GAAP and do not purport to be an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. EBITDA, adjusted EBITDA and adjusted EBITDAR have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
-- they do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; -- they do not reflect changes in, or cash requirements for, working capital; -- they do not reflect significant interest expense, or the cash requirements necessary to service interest or principal payments on our revolving credit facility or senior notes; -- they do not reflect payments made or future requirements for income taxes; -- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, adjusted EBITDA and adjusted EBITDAR do not reflect cash requirements for such replacements; and -- because not all companies use identical calculations, our presentation of EBITDA, adjusted EBITDA and adjusted EBITDAR may not be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:
Three Months Ended March 30, April 1, 2007 2008 Actual Pro Forma(a) Actual (in thousands) Net loss $(2,401) $(2,506) $(3,360) Depreciation, amortization, and accretion 6,351 9,661 10,736 Interest expense, net 3,010 10,267 9,862 Income tax expense (benefit) 260 (767) (1,384) EBITDA $7,220 $16,655 $15,854 Non-cash stock based compensation 675 675 845 Loss on disposal of assets 15 16 98 Other miscellaneous (105) (105) (158) Adjusted EBITDA $7,805 $17,241 $16,639 Rent Expense 6,014 7,417 8,411 Adjusted EBITDAR $13,819 $24,658 $25,050 (a) Pro forma results as if Town & Country had been included in the Company's operations for all of 2007.
The following table presents a reconciliation of net cash provided by operating activities to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:
Three Months Ended
April 1, March 30,
2007 2008
(in thousands)
Net cash provided by operating activities $4,577 $3,450
Changes in operating assets & liabilities 79 2,581
Loss on disposal of assets (15) (98)
Non-cash stock based compensation expense (675) (845)
Minority interest (16) (11)
Deferred income tax - 2,185
Amortization of debt premium - 114
Income taxes 260 (1,384)
Interest expense, net 3,010 9,862
EBITDA $7,220 $15,854
Non-cash stock based compensation 675 845
Loss on disposal of assets 15 98
Other miscellaneous (105) (158)
Adjusted EBITDA $7,805 $16,639
Rent Expense 6,014 8,411
Adjusted EBITDAR $13,819 $25,050
Contacts: Susser Holdings Corporation
Mary Sullivan, Chief Financial Officer
(361) 693-3743,
SUSS-IR
