Susser Petroleum Partners LP Reports Second Quarter 2013 Results

HOUSTON , Aug. 7, 2013 /PRNewswire/ -- Susser Petroleum Partners LP (NYSE: SUSP), a wholesale distributor of motor fuels, today reported financial and operating results for the second quarter ended June 30, 2013 .

Net income for the quarter was $9.7 million , or $0.44 per unit.  Adjusted EBITDA(1) totaled $12.8 million , and distributable cash flow(1) was $11.9 million .  Total revenue for the quarter was $1,118.1 million .

"We are pleased to announce the first increase in our quarterly distribution rate since our IPO," said Sam L. Susser , Chairman and Chief Executive Officer.  "Even with the increase, our distribution coverage for the quarter was a very healthy 1.2 times.  We anticipate continued growth in fuel volumes and rental income for the foreseeable future, which should position us for additional distribution increases in the future."

The analysis below compares actual results for the three- and six-month periods ended June 30, 2013 to pro forma results for the comparable periods in 2012.  The pro forma results reflect revenues and gross margins as if the Partnership had completed its initial public offering and related transactions and had been operating as an independent entity under its current contractual arrangements with affiliates since January 1 , 2012.  Please refer to the section below titled, "Factors Affecting Comparability and Explanation of Pro Forma Results" for additional information.

Second Quarter 2013 Compared to Pro Forma Second Quarter 2012

Revenue for the second quarter totaled $1,118.1 million , a 2.8 percent increase compared to $1,087.6 million (pro forma) in the comparable period of 2012. The increase was driven by a 5.4 percent increase in gallons sold, partially offset by a decline in the selling price per gallon.  In the second quarter of 2013, 67.2 percent of revenues were generated from motor fuel sales to affiliates, 32.5 percent were from motor fuel sales to other third parties, and 0.3 percent came from rental and other income.

Gross profit for the quarter totaled $17.0 million , a 20.7 percent increase compared to pro forma gross profit of $14.0 million in the second quarter of 2012.  On a weighted average basis, fuel margin for all gallons sold increased to 3.6 cents per gallon in the second quarter of 2013 compared to a pro forma 3.4 cents per gallon in the prior-year period.

Affiliate customers as of June 30, 2013 include 567 Stripes® convenience stores operated by our parent company, Susser Holdings Corporation (NYSE: SUSS), as well as SUSS' sales of motor fuel under consignment arrangements at approximately 90 independently operated convenience stores.  Motor fuel gallons sold to affiliates during the second quarter increased 8.0 percent versus the prior-year period to 264.1 million gallons.  Gross profit on these gallons totaled $7.9 million , or 3.0 cents per gallon, versus a pro forma $7.3 million in the comparable three-month period last year, or 3.0 cents per gallon.

Third-party customers of SUSP include approximately 488 independent dealers under long-term fuel supply agreements and approximately 1,800 other commercial customers as of June 30 , 2013.  Total gallons of motor fuel sold to third parties increased year-over-year by 0.3 percent, to 124.9 million gallons, for the quarter.  Gross profit on these gallons was $6.1 million , or 4.9 cents per gallon, compared to $5.2 million , or 4.2 cents per gallon, in the prior-year period on a pro forma basis.

YTD 2013 Compared to Pro Forma YTD 2012

Revenue for the first six months of 2013 totaled $2,199.3 million , a 1.6 percent increase compared to pro forma revenue of $2,164.1 million in the first half of 2012. Gross profit for the period totaled $32.5 million , an 18.0 percent increase compared to pro forma gross profit of $27.6 million in the prior-year period.  Total gallons of motor fuel sold to affiliates and to third parties increased year-over-year by 6.9 percent and 0.9 percent, to 515.2 million gallons and 240.8 million gallons, respectively, for the first half. On a weighted average basis, fuel margin for all gallons sold increased to 3.6 cents per gallon in the first six months of 2013 from 3.4 cents per gallon pro forma in the comparable period of 2012.

Capital Spending and Financing

SUSP completed purchase and leaseback transactions for six Stripes convenience stores during the second quarter for $21.2 million and two more so far in the third quarter for $6.7 million .  Since its initial public offering in September 2012 , SUSP has completed the purchase and leaseback of 22 Stripes stores for a cumulative cost of $89.7 million , including post-completion true-up.

Including the Stripes store purchases, SUSP's gross capital expenditures for the second quarter were $30.0 million , which included $0.2 million for maintenance capital.  At June 30 , SUSP had borrowings against its revolving line of credit of $84.8 million and other long-term debt of $97.0 million , a portion of which was collateralized by $95.9 million of marketable securities.

2013 Guidance

SUSP's management team is adjusting the following previously issued guidance for 2013.  Please refer to disclosures below regarding forward-looking statements.

Disclosures

New FY 2013


Guidance

Previous  FY 2013


Guidance

First Half 2013 Actual

Motor Fuel Gallons (billions) (a)

1.45 - 1.60

1.45 - 1.60

0.76

Fuel Margin (cents/gallon) (a)

3.4 - 3.6

3.3 - 3.5

3.6

New Stripes stores expected to be
purchased by SUSP (b)

25 - 30

25 - 35

12

New Wholesale dealer and
consignment sites (c)

28 - 40

25 - 40

15

Maintenance Capital Spending (millions)

$1 - $3

$1 - $3

$0.3

Expansion Capital Spending (millions) (d)

$95-$135

$95-$135

$57.6

Quarterly Distribution

SUSP announced today that the Board of Directors of its general partner has approved its quarterly distribution for the second quarter of 2013 of $0.4528 per unit.  This amount corresponds to $1.8112 per unit on an annualized basis and represents a 3.5 percent increase compared to the distribution for the previous quarter.  The total distribution amount of approximately $9.9 million is being paid from distributable cash flow of $11.9 million for the quarter.

The distribution will be paid on August 29, 2013 to unitholders of record on August 19, 2013 . Immediately prior to the distribution, there will be 21,878,872 units outstanding, including all of the Partnership's common and subordinated units.

Second Quarter Earnings Conference Call

Susser's management team will hold a conference call today at 10:00 a.m. ET ( 9:00 a.m. CT ) to discuss second quarter 2013 results for both Susser Holdings Corporation and Susser Petroleum Partners LP. To participate in the call, dial 480-629-9770 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 14 by calling 303-590-3030 and using the pass code 4630288#.

Factors Affecting Comparability and Explanation of Pro Forma Results

SUSP completed its initial public offering of common units representing limited partner interests on September 25 , 2012.  Reported results of operations for the three- and six-month periods ending June 30, 2012 reflect the results of Susser Petroleum Company LLC, the Partnership's "Predecessor".  Prior to September 25, 2012 , the Predecessor did not charge intercompany gross profit on motor fuel sales to Susser Holdings' Stripes convenience stores. Additionally, not all of the wholesale operations of the Predecessor were contributed to SUSP, such as consignment location fuel sales and the fuel transportation assets and operations.  As a result, actual operating results are not comparable on a period-to-period basis.  

Selected supplemental pro forma information is being provided, which reflects certain SUSP results as if the current structure and contracts had been in place on January 1 , 2012.  The pro forma results show actual gallons sold but reflect revenues and gross margins as if the Partnership had completed its initial public offering and related transactions and had been operating as an independent entity under its current contractual arrangements with affiliates since January 1 , 2012.  Additional details regarding our pro forma adjustments are included in the attached tables. Management believes the pro forma presentation provides investors with a more relevant comparison to historical and future periods as opposed to actual results. 

About Susser Petroleum Partners LP

Houston -based Susser Petroleum Partners LP is a publicly-traded partnership formed by Susser Holdings Corporation to engage in the primarily fee-based wholesale distribution of motor fuels to Susser Holdings and third parties. Susser Petroleum Partners distributes over 1.5 billion gallons of motor fuel annually from major oil companies and independent refiners to Susser Holdings' Stripes convenience stores, independently operated consignment locations, convenience stores and retail fuel outlets operated by independent operators and other commercial customers in Texas , New Mexico , Oklahoma and Louisiana .

Forward-Looking Statements

This news release contains "forward-looking statements." 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: Susser Holdings' business strategy, operations and conflicts of interest with us; our ability to renew or renegotiate our long-term distribution contracts with our customers; changes in the price of and demand for the motor fuel that we distribute; our dependence on two principal suppliers; competition in the wholesale motor fuel distribution industry; seasonal trends; increased costs; our ability to make acquisitions; environmental laws and regulations; dangers inherent in the storage of motor fuel; our reliance on SHC for transportation services;  and other unforeseen factors.  For a full discussion of these and other risks and uncertainties, refer to the "Risk Factors" section of the Partnership'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.

Qualified Notice

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat 100 percent of Susser Petroleum Partners' distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, Susser Petroleum Partners' distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Financial statements follow

Pro Forma Results

The following presentation compares actual first half and second quarter 2013 results to the pro forma revenues and gross profit for SUSP in the first half and second quarter of 2012, had the transactions and contracts related to the IPO occurred as of January 1 , 2012.  Specifically, the following pro forma schedules give effect to:

  • the contribution by our Predecessor to us of substantially all of the assets and operations comprising its wholesale motor fuel distribution business (other than its motor fuel consignment business and transportation assets and substantially all of its accounts receivable and payable);
  • the contribution by SUSS and our Predecessor to us of certain convenience store properties;
  • our entry into a fuel distribution contract with SUSS, pursuant to which we receive (i) a fixed profit margin (averaging three cents ) on the motor fuel distributed to SUSS for its Stripes convenience stores, instead of no margin historically reflected in our Predecessor financial statements and (ii) a fixed profit margin (averaging three cents ) on all volumes sold to SUSS for its independently operated consignment locations, instead of the variable and higher margin received by our Predecessor under consignment contracts; and
  • our entry into the SUSS Transportation Contract and the elimination of revenues and costs associated with the transportation business that were included in our Predecessor's results of operations.

As used in the following table, "affiliates" refers to sales to SUSS for its Stripes convenience stores and independently operated consignment locations; "third-party" refers to sales to independently operated dealer supply locations and other commercial customers.  

Pro Forma Results

Three Months Ended

Six Months Ended

June 30,
2012

June 30,
2013

June 30,
2012

June 30,
2013

Pro Forma

Actual

Pro Forma

Actual

(in thousands, except for gross profit per gallon)

Revenues:

Motor fuel sales to third parties

$

372,899

$

363,318

$

724,744

$

710,822

Motor fuel sales to affiliates

712,738

751,304

1,435,234

1,482,031

Rental income

840

2,276

1,679

3,905

Other income

1,098

1,207

2,450

2,506

Total revenue

1,087,575

1,118,105

2,164,107

2,199,264

Gross profit:

Motor fuel sales to third parties

5,225

6,078

10,038

11,875

Motor fuel sales to affiliates

7,333

7,934

14,456

15,352

Rental income

840

2,276

1,679

3,905

Other

651

668

1,380

1,380

Total gross profit

$

14,049

$

16,956

$

27,553

$

32,512

Operating Data:

Motor fuel gallons sold:

Third-party dealers and other commercial customers

124,599

124,943

238,526

240,773

Affiliated gallons

244,428

264,098

481,869

515,150

Total gallons sold

369,027

389,041

720,395

755,923

Motor fuel gross profit cents per gallon:

Third-party

4.2

¢

4.9

¢

4.2

¢

4.9

¢

Affiliated

3.0

¢

3.0

¢

3.0

¢

3.0

¢

Volume-weighted average for all gallons

3.4

¢

3.6

¢

3.4

¢

3.6

¢

 

Consolidated Statements of Operations

Susser Petroleum Partners LP

Consolidated Statements of Operations

Unaudited

Three Months Ended

Six Months Ended

June 30, 2012

June 30, 2013

June 30, 2012

June 30, 2013

Predecessor

Predecessor

(in thousands, except unit and per unit amounts)

Revenues:

Motor fuel sales to third parties

$

466,743

$

363,318

$

905,543

$

710,822

Motor fuel sales to affiliates

616,727

751,304

1,247,171

1,482,031

Rental income

1,355

2,276

2,719

3,905

Other income

1,686

1,207

3,731

2,506

Total revenues

1,086,511

1,118,105

2,159,164

2,199,264

Cost of sales:

Motor fuel cost of sales to third parties

455,173

357,240

886,861

698,947

Motor fuel cost of sales to affiliates

616,727

743,370

1,247,171

1,466,679

Other

431

539

1,069

1,126

Total cost of sales

1,072,331

1,101,149

2,135,101

2,166,752

Gross profit

14,180

16,956

24,063

32,512

Operating expenses:

General and administrative

3,153

3,649

5,801

7,548

Other operating

2,203

568

3,639

1,199

Rent

1,110

300

2,180

504

Loss (gain) on disposal of assets

(75)

72

36

94

Depreciation, amortization and accretion

1,892

1,837

3,776

3,658

Total operating expenses

8,283

6,426

15,432

13,003

Income from operations

5,897

10,530

8,631

19,509

Interest expense, net

(92)

(766)

(180)

(1,449)

Income before income taxes

5,805

9,764

8,451

18,060

Income tax expense

(2,102)

(84)

(3,074)

(153)

Net income and comprehensive income

$

3,703

$

9,680

$

5,377

$

17,907

Net income per limited partner unit:

Common

$

0.44

$

0.82

Subordinated

$

0.44

$

0.82

Limited partner units outstanding:

Common units - public

10,925,000

10,925,000

Common units - affiliated

14,436

14,436

Subordinated units - affiliated

10,939,436

10,939,436

Cash distribution per unit

$

0.4528

$

0.8903

 

Balance Sheets

Susser Petroleum Partners LP

Consolidated Balance Sheets

December 31, 2012

June 30, 2013

(unaudited)

(in thousands)

Assets

Current assets:

Cash and cash equivalents

$

6,752

$

16,488

Accounts receivable, net of allowance for doubtful accounts of $103 at December 31, 2012, and $286 at June 30, 2013

33,008

40,246

Receivables from affiliates

59,543

51,256

Inventories, net

2,981

22,369

Other current assets

821

1,416

Total current assets

103,105

131,775

Property and equipment, net

68,173

123,251

Other assets:

Marketable securities

148,264

95,893

Goodwill

12,936

12,936

Intangible assets, net

23,131

22,011

Other noncurrent assets

191

398

Total assets

$

355,800

$

386,264

Liabilities and unitholders' equity

Current liabilities:

Accounts payable

$

88,884

$

119,535

Accrued expenses and other current liabilities

1,101

4,608

Current maturities of long-term debt

24

24

Total current liabilities

90,009

124,167

Revolving line of credit

35,590

84,800

Long-term debt

149,241

96,928

Deferred tax liability, long-term portion

152

164

Other noncurrent liabilities

2,476

2,305

Total liabilities

277,468

308,364

Commitments and contingencies:

Unitholders' equity:

Susser Petroleum Partners LP unitholders' equity:

  Common unitholders - public (10,925,000 units issued and outstanding)

210,462

210,247

  Common unitholders - affiliated (14,436 units issued and outstanding)

(175)

(175)

  Subordinated unitholders - affiliated (10,939,436 units issued and outstanding)

(131,955)

(132,172)

Total unitholders' equity

78,332

77,900

Total liabilities and unitholders' equity

$

355,800

$

386,264

 

Key Operating Metrics

The following table sets forth, for the periods indicated, information concerning key measures we rely on to gauge our operating performance.  Historical results include our Predecessor's results of operations.  The following information is intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.

Key Operating Metrics

Three Months Ended

Six Months Ended

June 30,

2012 (1)

June 30,
2013

June 30,

2012 (1)

June 30, 2013

Predecessor

Predecessor

(in thousands, except for selling price and gross profit per gallon)

Revenues:

Motor fuel sales to third parties (2)

$

466,743

$

363,318

$

905,543

$

710,822

Motor fuel sales to affiliates (2)

616,727

751,304

1,247,171

1,482,031

Rental income

1,355

2,276

2,719

3,905

Other income

1,686

1,207

3,731

2,506

Total revenue

1,086,511

1,118,105

2,159,164

2,199,264

Gross profit:

Motor fuel gross profit to third parties (2)

11,570

6,078

18,682

11,875

Motor fuel gross profit to affiliates (2)

—

7,934

—

15,352

Rental income

1,355

2,276

2,719

3,905

Other

1,255

668

2,662

1,380

Total gross profit

14,180

16,956

24,063

32,512

Net income

$

3,703

$

9,680

$

5,377

$

17,907

Adjusted EBITDA (3)

$

8,048

$

12,840

$

13,012

$

24,067

Distributable cash flow (3)

$

11,907

$

22,342

Operating Data:

Total motor fuel gallons sold:

  Third-party

153,565

124,943

295,147

240,773

  Affiliated gallons

215,462

264,098

425,249

515,150

Average wholesale selling price per gallon

$

2.94

$

2.87

$

2.99

$

2.90

Motor fuel gross profit cents per gallon (2):

 Third-party

7.5

¢

4.9

¢

6.3

¢

4.9

¢

Affiliated

—

¢

3.0

¢

—

¢

3.0

¢

Volume-weighted average for all gallons

3.1

¢

3.6

¢

2.6

¢

3.6

¢

We believe EBITDA, Adjusted EBITDA and distributable cash flow are useful to investors in evaluating our operating performance because:

  • Adjusted EBITDA is used as a performance measure under our revolving credit facility;
  • securities analysts and other interested parties use such metrics as measures of financial performance, ability to make distributions to our unitholders and debt service capabilities;
  • they are used by our management for internal planning purposes, including aspects of our consolidated operating budget, and capital expenditures; and
  • distributable cash flow provides useful information to investors as it is a widely accepted financial indicator used by investors to compare partnership performance, as it provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating.

EBITDA, Adjusted EBITDA and distributable cash flow are not recognized terms under GAAP and do not purport to be alternatives to net income (loss) as measures of operating performance. EBITDA, Adjusted EBITDA and distributable cash flow have limitations as analytical tools, and one should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations include:

  • they do not reflect our total 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 interest expense, or the cash requirements necessary to service interest or principal payments on our  revolving credit facility or term loan;
  • 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 and Adjusted EBITDA do not reflect cash requirements for such replacements; and
  • because not all companies use identical calculations, our presentation of EBITDA, Adjusted EBITDA and distributable cash flow 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 distributable cash flow:

Reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow

Three Months Ended

Six Months Ended

June 30,
2012

June 30,
2013

June 30,
2012

June 30,
2013

Predecessor

Predecessor

(in thousands)

Net income

$

3,703

$

9,680

$

5,377

$

17,907

Depreciation, amortization and accretion

1,892

1,837

3,776

3,658

Interest expense, net

92

766

180

1,449

Income tax expense

2,102

84

3,074

153

EBITDA

7,789

12,367

12,407

23,167

Non-cash stock-based compensation

334

401

569

806

Loss (gain) on disposal of assets and impairment charge

(75)

72

36

94

Adjusted EBITDA

$

8,048

$

12,840

$

13,012

$

24,067

Cash interest expense

671

1,258

State franchise tax expense (cash)

72

141

Maintenance capital expenditures

190

326

Distributable cash flow

$

11,907

$

22,342

 

SOURCE Susser Petroleum Partners LP

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