Earnings Roundup: Susser Holdings & Getty Realty

CORPUS CHRISTI, Texas & JERICHO, N.Y. -- Susser Holdings Corp. reported same-store merchandise sales for the first quarter of 2011 increased 5.6 percent, compared with an increase of 2.5 percent in the first quarter of 2010. Retail net merchandise margin for the three months ended April 3 was 34.0 percent, up from 32.7 percent in the same quarter last year. Average retail gallons per store per week increased 3.2 percent year over year, while retail fuel margins increased to 15.3 cents per gallon vs. 11.1 cents a year ago.

Susser's adjusted EBITDA increased 66.5 percent from a year ago to $23.1 million in the latest quarter, driven by higher margins from retail and wholesale fuel sales and from merchandise. Total gross profit was $115.7 million, an increase of 18.5 percent from the first quarter of 2010.

Total revenues were $1.2 billion, a 24.6-percent increase from a year ago, which the company said was the result of a 29.5-percent increase in combined retail and wholesale fuel revenues and a 6.3-percent increase in overall merchandise sales.

The company reported a net loss of $23,000 in the first quarter, which is one of its two seasonally weakest quarters, vs. a net loss of $5.0 million in the same quarter last year.

"During the first quarter, we continued to benefit from a steady increase in fuel volumes, same-store merchandise sales and merchandise gross profit margin," stated Sam L. Susser, president and CEO. "Based on this strong first quarter performance, we are raising our guidance for 2011 for same-store merchandise sales growth to a range of 3.0 percent to 5.5 percent, and we also are raising the lower end of our guidance range for new dealer sites to a minimum of 20."

Susser also noted the chain's West Texas stores continued to lead the growth, driven by accelerating oil and gas activity in the Permian Basin and the completion in March of its Town & Country rebranding program to the Stripes store brand. South Texas also delivered same-store sales growth, albeit at a slower pace, with the majority of those markets enjoying increased traffic in the first quarter, reflecting steady economic improvement.

Meanwhile, average fuel gallons per week sold at its convenience stores continued to grow, after contracting slightly in the first quarter of last year. Both retail and wholesale diesel gallons were significantly higher -- evidence of increased freight movement and stronger overall commercial activity in Texas.

"Many of our customers continue to be value conscious, but we're successfully growing merchandise sales and margins through diligent cost management, improved shortage control and a more favorable mix of higher-margin food service and beverage sales," Susser stated.

In terms of new convenience stores and wholesaler dealer sites, the company opened two large-format retail stores during the first quarter and closed one smaller store, raising its total number of retail stores in operation at April 3 to 527. Two additional new-build stores were opened, a third acquired location was remodeled and opened, and one smaller store was closed so far in the second quarter, bringing the current retail store count to 529. Five additional Stripes convenience stores are currently under construction.

In its wholesale fuel business, Susser added five new dealer sites and discontinued supplying four sites, for a total of 432 dealer locations at the end of the first quarter. Six additional sites have been added to the wholesale network so far during the second quarter.

In April, the company generated proceeds of $3.7 million from a sale-leaseback transaction for one recently completed convenience store. In addition, Susser reported that it completed a $20 million long-term mortgage facility in early May with a regional bank.

In addition to Susser, Getty Realty Corp. reported financial results for its first quarter ended March 31. President and CEO David Driscoll said with the acquisition of two real estate portfolios including 125 properties, an equity offering and a number of developments with its largest tenant, Getty Petroleum Marketing Inc. (GPMI), it was an exceptionally productive quarter.

"I expect that the full effect of this activity will be realized in the quarters to come," he stated. "We also remain active on the acquisition and financing fronts and are concentrating a lot of energy and attention into our discussions with GPMI. We believe the recent change of ownership of GPMI has created a meaningful opportunity to make mutually beneficial progress reducing the size of the GPMI portfolio and thereby potentially reducing our exposure to GPMI."

On Feb. 28, Lukoil, one of the largest integrated Russian oil companies, transferred its ownership interest in GPMI to Cambridge Petroleum Holdings Inc. Getty Realty said it continues to engage in discussions with the new owners and management, but thus far this has not resulted in a definitive agreement on any specific issues. It's possible these discussions could result in material changes to its leases with GPMI in the near term, which could adversely impact the company's cash flow.

Driscoll also noted that all of the company's earnings metrics in the first quarter were negatively affected by an approximately $2 million charge for property acquisition costs incurred and expensed during the quarter related to property portfolios acquired. In addition, he said the company's per share metrics for the quarter were lower, partially as a result of having more shares outstanding during the current quarter following the company's common share offerings in May 2010 and January 2011, and not as a result of erosion in its core operating business.

Net earnings for the quarter decreased by $0.5 million to $11.4 million, compared to $11.9 million for the quarter ended March 31, 2010. Earnings from continuing operations for the quarter decreased by $0.3 million to $11.3 million, compared to $11.6 million for the year-ago quarter. Earnings from discontinued operations were $0.1 million for the quarter, compared to $0.3 million for the quarter ended March 31, 2010. The results of discontinued operations are primarily comprised of gains on dispositions of real estate, according to the company.

The $0.3-million decrease in earnings from continuing operations was also primarily due to the property acquisition costs included in operating expenses associated with the company's portfolio acquisitions of 125 properties this quarter. This was partially offset by an increase in revenues from rental properties. The $0.2-million decrease in earnings from discontinued operations this quarter was principally due to lower gains on dispositions of real estate.

During the first quarter of 2011, Getty Realty completed a public stock offering of 3.45 million shares of common stock. Substantially all of the $92 million net proceeds were used to repay a portion of the outstanding balance under the company's revolving credit agreement, which had been drawn in January to fund the acquisition and leaseback transaction with Chestnut Petroleum Distributors and ExxonMobil Corp. The remainder was used for general corporate purposes. Since May 2010, the company has issued a total of 8.6 million shares of common stock.

In regards to acquisitions, the company on Jan. 13 acquired 59 Mobil branded gasoline station and convenience store properties located in and around the northern suburbs of New York City (including Westchester and Rockland Counties) and the lower Hudson Valley, funding a total investment of $111.3 million. The 59 properties were acquired in a simultaneous transaction among Exxon Mobil, CPD NY Energy Corp. (a subsidiary of Chestnut Petroleum Distributors) and Getty Realty Corp. CPD acquired a portfolio of 65 gasoline station and convenience stores from Exxon Mobil and simultaneously completed a sale/leaseback of substantially all of the acquired properties with Getty Realty Corp.

On March 31, the company acquired 66 Shell branded gasoline station and c-store properties located in and around the Greater Boston and Southern New Hampshire area for approximately $86.1 million, in a sale/leaseback transaction with Nouria Energy Ventures I, LLC, a subsidiary of Nouria Energy Group. The 66 properties were acquired in a simultaneous transaction among Motiva Enterprises LLC, Nouria and Getty Realty. Nouria acquired the 66 properties from Shell and simultaneously completed a sale/leaseback with Getty for all of the properties.

Getty Realty Corp. specializes in the ownership and leasing of convenience store/gas station properties and petroleum distribution terminals. The company owns and leases approximately 1,170 properties nationwide.