Susser Petroleum Partners LP Reports Third Quarter 2013 Results

HOUSTON, Nov. 6, 2013 /PRNewswire/ --Susser Petroleum Partners LP (NYSE: SUSP), a wholesale distributor of motor fuels, today reported financial and operating results for its 2013 third quarter, representing the three months ended September 30, 2013.

Net income for the quarter was $9.6 million, or $0.43 per diluted unit.  Adjusted EBITDA⁽¹⁾ totaled $13.8 million, and distributable cash flow⁽¹⁾ was $12.7 million.  Total revenue for the quarter was $1,163.7 million.

"As a result of another solid quarter of growth in distributable cash flow, we're pleased to announce our second consecutive distribution increase," said Sam L. Susser , Chairman of the Board of Directors of the general partner of SUSP. "Fuel volumes remain strong, and we added 10 new Stripes® convenience store locations to our real estate portfolio through purchase leaseback transactions.  SUSP now owns 30 Stripes stores.  The Gainesville Fuel business was contributed to SUSP on September 6, and the integration of that business is off to a very good start."

The discussion and analysis below compares actual results for the three- and nine-month periods ended September 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.

Third Quarter 2013 Compared to Pro Forma Third Quarter 2012

Revenue for the third quarter of 2013 totaled $1,163.7 million, a 4.6 percent increase compared to $1,112.9 million (pro forma) in the comparable period of 2012. The increase was driven by an 8.8 percent increase in gallons sold, partially offset by a decline in the selling price per gallon.  In the third quarter, 66.7 percent of revenues were generated from motor fuel sales to affiliates, 33.0 percent were from motor fuel sales to other third parties, and 0.3 percent came from rental and other income.  Third quarter results reflect the contribution of the Gainesville Fuel business to SUSP from SUSS  on September 6.

Gross profit for the quarter totaled $18.4 million, a 26.0 percent increase compared to pro forma gross profit of $14.6 million in the third quarter of 2012.  On a weighted average basis, fuel margin for all gallons sold increased to 3.7 cents per gallon in the third quarter of 2013 compared to a pro forma 3.6 cents per gallon in the prior-year period.

Affiliate customers as of September 30, 2013 included 576 Stripes convenience stores operated by our parent company, Susser Holdings Corporation (NYSE: SUSS), as well as approximately 90 independently operated convenience stores through which SUSS sells fuel through consignment arrangements.  Motor fuel gallons sold to affiliates during the third quarter increased 8.5 percent versus the prior-year period to 268.6 million gallons.  Gross profit on these gallons totaled $8.1 million, or 3.0 cents per gallon, versus a pro forma $7.4 million, or 3.0 cents per gallon, in the comparable three-month period last year.

Third-party customers of SUSP included approximately 490 independent dealers under long-term fuel supply agreements, approximately 10 independently operated consignment locations and approximately 1,850  other commercial customers as of September 30, 2013.  Total sales of motor fuel to third parties increased year-over-year by 9.3 percent for the quarter, to 131.0 million gallons.  Gross profit on these gallons was $6.8 million, or 5.2 cents per gallon, compared to $5.6 million, or 4.7 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 nine months of 2013 totaled $3,363.0 million, a 2.6 percent increase compared to pro forma revenue of $3,277.0 million in the first nine months of 2012. Gross profit for the period totaled $50.9 million, a 20.8 percent increase compared to pro forma gross profit of $42.2 million in the prior-year period.  Total sales of motor fuel to affiliates increased year-over-year by 7.4 percent to 783.7 million gallons, and sales to third parties increased by 3.7 percent to 371.7 million gallons. On a weighted average basis, fuel margin for all gallons sold increased to 3.6 cents per gallon in the first nine months of 2013 from 3.5 cents per gallon pro forma in the comparable period of 2012.

Capital Spending and Financing

SUSP completed purchase and leaseback transactions for 10 Stripes convenience stores during the third quarter for $39.5 million. No additional purchase and leaseback transactions have been completed so far in the fourth quarter.  Since its initial public offering in September 2012, SUSP has completed the purchase and leaseback of 30 Stripes stores for a cumulative cost of $121.0 million, including post-completion true-up.

Including the Stripes store purchases, SUSP's gross capital expenditures for the third quarter were $43.9 million, which included $0.2 million for maintenance capital.  At September 30, SUSP had borrowings against its revolving line of credit of $142.8 million and other long-term debt of $41.9 million, a portion of which was collateralized by $37.9 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.

Quarterly Distribution

SUSP announced today that the Board of Directors of its general partner has approved a quarterly distribution for the third quarter of 2013 of $0.4687 per unit.  This amount corresponds to $1.87 per unit on an annualized basis and represents a 3.5 percent increase compared to the distribution for the previous quarter.  This distribution is 7.1 percent above our minimum quarterly distribution.  The total distribution amount of approximately $10.3 million is being paid from distributable cash flow of $12.7 million for the quarter and reflects a distribution coverage ratio of 1.2 times.

The distribution will be paid on November 29, 2013 to unitholders of record on November 19, 2013. Immediately prior to the distribution, there will be 21,951,578 units outstanding, including all of the Partnership's common and subordinated units.

Third 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 third quarter 2013 results for both Susser Petroleum Partners LP and Susser Holdings Corporation. To participate in the call, dial 480-629-9771 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 Petroleum Partners' web site at www.susserpetroleumpartners.com and Susser Holdings' web site at www.susser.com under Events and Presentations.  A telephone replay will be available through November 13 by calling 303-590-3030 and using the pass code 4645491#.

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 nine-month periods ending September 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 nine months and third quarter 2013 results to the pro forma revenues and gross profit for SUSP in the first nine months and third 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.  

 

 

 

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.

 

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 tables present a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow:

 

SOURCE Susser Petroleum Partners LP; Susser Holdings Corporation