Susser Petroleum Partners Lp Reports Third Quarter 2013 Results
The following excerpt is from the company's SEC filing
HOUSTON, November 6, 2013 - 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.
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.
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.
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.
SUSP's management team is adjusting the following previously issued guidance for 2013. Please refer to disclosures below regarding forward-looking statements.
New FY 2013GuidancePrevious FY 2013GuidanceNine Months 2013 ActualMotor Fuel Gallons (billions) (a)1.50 - 1.601.45 - 1.601.15Fuel Margin (cents/gallon) (a)3.5 - 3.73.4 - 3.63.6New Stripes stores expected to be purchased by SUSP (b)25 - 3025 - 3022New Wholesale dealer and consignment sites (c)32 - 4028 - 4024Maintenance Capital Spending (millions)$0.75 - $1.5$1.0 - $3.0$0.5Expansion Capital Spending (millions) (d)$115 - $135$95 - $135$101.3
(1)Adjusted EBITDA and distributable cash flow are non-GAAP financial measures of performance that have limitations and should not be considered as a substitute for net income. Please refer to the discussion and tables under “Key Operating Metrics” later in this news release for a discussion of our use of Adjusted EBITDA and distributable cash flow, and reconciliation to net income for the periods presented.
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.
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#.
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.
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.
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.
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.
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);
•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.
Three Months Ended Nine Months Ended September 30, 2012 September 30, 2013 September 30, 2012 September 30, 2013 Pro Forma Actual Pro Forma Actual (in thousands, except for gross profit per gallon)Revenues: Motor fuel sales to third parties$369,354 $383,896 $1,094,098 $1,094,718Motor fuel sales to affiliates741,532 775,769 2,176,767 2,257,800Rental income837 2,820 2,517 6,725Other income1,162 1,231 3,610 3,737Total revenue1,112,885 1,163,716 3,276,992 3,362,980Gross profit: Motor fuel sales to third parties5,639 6,791 15,676 18,666Motor fuel sales to affiliates7,439 8,112 21,896 23,464Rental income837 2,820 2,517 6,725Other693 680 2,071 2,060Total gross profit$14,608 $18,403 $42,160 $50,915Operating Data: Motor fuel gallons sold: Third-party dealers and other commercial customers119,785 130,959 358,311 371,732Affiliates247,578 268,565 729,447 783,715Total gallons sold367,363 399,524 1,087,758 1,155,447Motor fuel gross profit (cents per gallon): Third-party4.7¢ 5.2¢ 4.4¢ 5.0¢Affiliated3.0¢ 3.0¢ 3.0¢ 3.0¢Volume-weighted average for all gallons3.6¢ 3.7¢ 3.5¢ 3.6¢
Three Months Ended Nine Months Ended September 30, 2012 September 30, 2013 September 30, 2012 September 30, 2013 Predecessor Predecessor (in thousands, except unit and per unit amounts)Revenues: Motor fuel sales to third parties$458,817 $383,896 $1,364,361 $1,094,718Motor fuel sales to affiliates647,301 775,769 1,894,471 2,257,800Rental income1,359 2,820 4,078 6,725Other income2,140 1,231 5,871 3,737Total revenues1,109,617 1,163,716 3,268,781 3,362,980Cost of sales: Motor fuel cost of sales to third parties449,486 377,105 1,336,351 1,076,052Motor fuel cost of sales to affiliates646,833 767,657 1,894,000 2,234,336Other470 551 1,539 1,677Total cost of sales1,096,789 1,145,313 3,231,890 3,312,065Gross profit12,828 18,403 36,891 50,915Operating expenses: General and administrative3,035 4,329 8,836 11,877Other operating1,036 606 4,675 1,805Rent1,078 261 3,258 765Loss on disposal of assets194 112 229 206Depreciation, amortization and accretion2,016 2,432 5,793 6,090Total operating expenses7,359 7,740 22,791 20,743Income from operations5,469 10,663 14,100 30,172Interest expense, net(113) (921) (293) (2,370)Income before income taxes5,356 9,742 13,807 27,802Income tax expense(1,739) (145) (4,813) (298)Net income and comprehensive income$3,617 $9,597 $8,994 $27,504 Less: Predecessor income prior to initial public offering on September 25, 20123,043 8,420 Limited partners' interest in net income subsequent to initial public offering$574 $574 Net income per limited partner unit: Common - basic$0.03 $0.44 $0.03 $1.26Common - diluted$0.03 $0.43 $0.03 $1.25Subordinated (basic and diluted)$0.03 $0.44 $0.03 $1.26Weighted average limited partner units outstanding: Common units - public10,925,000 10,927,611 10,925,000 10,925,870Common units - affiliated14,436 36,060 14,436 21,644Subordinated units - affiliated10,939,436 10,939,436 10,939,436 10,939,436 Cash distribution per unit$0.0285 $0.4687 $0.0285 $1.359
December 31, 2012 September 30, 2013 (unaudited) (in thousands, except units)Assets Current assets: Cash and cash equivalents$6,752 $17,917Accounts receivable, net of allowance for doubtful accounts of $103 at December 31, 2012, and $355 at September 30, 201333,008 63,127Receivables from affiliates59,543 36,431Inventories, net2,981 15,474Other current assets821 243Total current assets103,105 133,192Property and equipment, net68,173 169,300Other assets: Marketable securities148,264 37,936Goodwill12,936 22,432Intangible assets, net23,131 22,344Other noncurrent assets191 182Total assets$355,800 $385,386Liabilities and equity Current liabilities: Accounts payable$88,884 $104,474Accrued expenses and other current liabilities1,101 13,355Current maturities of long-term debt24 525Total current liabilities90,009 118,354Revolving line of credit35,590 142,800Long-term debt149,241 41,422Deferred tax liability, long-term portion152 424Other noncurrent liabilities2,476 2,285Total liabilities277,468 305,285Commitments and contingencies: Partners' equity: Limited partners: Common unitholders - public (10,925,000 units issued and outstanding at December 31, 2012 and 10,932,834 units issued and outstanding at September 30, 2013)210,462 210,360Common unitholders - affiliated (14,436 units issued and outstanding at December 31, 2012 and 79,308 units issued and outstanding at September 30, 2013)(175) 1,796Subordinated unitholders - affiliated (10,939,436 units issued and outstanding)(131,955) (132,055)Total equity78,332 80,101Total liabilities and equity$355,800 $385,386
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.
Three Months Ended Nine Months Ended September 30, 2012 (1) September 30, 2013 September 30, 2012 (1) September 30, 2013 Predecessor Predecessor (in thousands, except for selling price and gross profit per gallon)Revenues: Motor fuel sales to third parties (1)$458,817 $383,896 $1,364,361 $1,094,718Motor fuel sales to affiliates (1)647,301 775,769 1,894,471 2,257,800Rental income1,359 2,820 4,078 6,725Other income2,140 1,231 5,871 3,737Total revenue1,109,617 1,163,716 3,268,781 3,362,980Gross profit: Motor fuel gross profit to third parties (1)9,331 6,791 28,010 18,666Motor fuel gross profit to affiliates (1)468 8,112 471 23,464Rental income1,359 2,820 4,078 6,725Other1,670 680 4,332 2,060Total gross profit12,828 18,403 36,891 50,915Net income$3,617 $9,597 $8,994 $27,504Adjusted EBITDA (2)$7,926 $13,753 $20,938 $37,819Distributable cash flow (2)$644 $12,693 $644 $35,032Operating Data: Total motor fuel gallons sold: Third-party 147,848 130,959 442,995 371,732 Affiliated gallons219,514 268,565 644,763 783,715Average wholesale selling price per gallon$3.01 $2.90 $3.00 $2.90Motor fuel gross profit (cents per gallon) (1): Third-party6.3¢ 5.2¢ 6.3¢ 5.0¢Affiliated0.2¢ 3.0¢ 0.1¢ 3.0¢Volume-weighted average for all gallons2.7¢ 3.7¢ 2.6¢ 3.6¢
(1)For the historical periods presented, other than the six-day period from the completion of the Partnership's IPO September 25, 2012 through September 30, 2012, affiliated sales only include sales to Stripes® convenience stores, for which our Predecessor historically received no margin, and third-party motor fuel sales and gross profit cents per gallon include the motor fuel sold directly to independently operated consignment locations, as well as sales to third-party dealers and other commercial customers. Following our IPO on September 25, 2012, we sell fuel to SUSS for both Stripes® convenience stores and SUSS' independently operated consignment locations at a fixed profit margin of approximately three cents per gallon, and these sales are classified as affiliated sales.
(2)We define EBITDA as net income before net interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA further adjusts EBITDA to reflect certain other non-recurring and non-cash items. We define distributable cash flow as Adjusted EBITDA less cash interest expense, cash state franchise tax expense, maintenance capital expenditures, and other non-cash adjustments. Adjusted EBITDA and distributable cash flow are not financial measures calculated in accordance with GAAP.
•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 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.
Three Months Ended Susser Petroleum Company LLC Predecessor Susser Petroleum Partners LP September 30, 2012 September 30, 2013 Through September 24, 2012 From September 25, 2012 (in thousands)Net income$3,043 $574 $3,617 $9,597Depreciation, amortization and accretion1,958 58 2,016 2,432Interest expense, net89 24 113 921Income tax expense1,735 4 1,739 145EBITDA6,825 660 7,485 13,095Non-cash stock based compensation (a)241 6 247 546Loss on disposal of assets 194 — 194 112Adjusted EBITDA$7,260 $666 $7,926 $13,753Cash interest expense 18 825State franchise tax expense (cash) 4 24Maintenance capital expenditures — 211Distributable cash flow $644 $12,693
Nine Months Ended Susser Petroleum Company LLC Predecessor Susser Petroleum Partners LP September 30, 2012 September 30, 2013 Through September 24, 2012 From September 25, 2012 (in thousands)Net income$8,420 $574 $8,994 $27,504Depreciation, amortization and accretion5,735 58 5,793 6,090Interest expense, net269 24 293 2,370Income tax expense4,809 4 4,813 298EBITDA19,233 660 19,893 36,262Non-cash stock based compensation (a)810 6 816 1,351Loss on disposal of assets 229 — 229 206Adjusted EBITDA$20,272 $666 $20,938 $37,819Cash interest expense 18 2,084State franchise tax expense (cash) 4 165Maintenance capital expenditures — 538Distributable cash flow $644 $35,032
(a) Predecessor allocation of non-cash stock based compensation through September 24, 2012 has been reclassified, and is being reflected in the above reconciliation tables.
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here. Susser Petroleum Partners LP next reports earnings on November 06, 2013.
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