Susser Holdings Corporation Q3 2008 Earnings Call Transcript

Nov.24.08 | About: Susser Holdings (SUSS)

Susser Holdings Corporation (NYSE:SUSS)

Q3 2008 Earnings Call

November 6, 2008 11:00 am ET

Executives

Chip Bonner - EVP and General Counsel

Sam Susser - President and CEO

Steve DeSutter - President and CEO of Retail

Mary Sullivan - EVP, Treasurer and CFO

Analysts

John Lawrence - Morgan, Keegan & Company

Bryan Hunt - Wachovia

Anthony Lebiedzinski - Sidoti & Company

Radina Russell - JPMorgan

Mike Smith - Kansas City Capital

Andrew Berg - Post Advisory Group

Chris Smith - SCM Advisors

Chip Bonner

Thank you. Good morning, everyone. Thanks for joining us. Yesterday afternoon, Susser released its third quarter 2008 earnings and our news release was broadcast to our e-mail list. If you'd like to be added to our list, please contact our Investor Relation's firm, DRG&E at 713-529-6600, or send your requests via the Investor Relation's page of our website, and we will be glad to add you.

A replay will be available both on the web and via telephone replay. To access a replay on the web, go to our IR page at www.susser.com. You'll find a phone number and an access code in the Earnings Release, if you'd like to listen to replay by phone.

Today's call contains various forward-looking statements and includes information as based on management's beliefs and assumptions. It includes Susser's objectives, targets, plans, strategies, costs and anticipated capital expenditures. These statements involve risk and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in our 2007 10-K and our subsequent 10-Q filings.

We will discuss certain non-GAAP financial measures that we believe are helpful to a full understanding of our financial condition. Please refer to our news release which includes a presentation and reconciliation of each financial measure. Information reported on this call speaks only to the companies view as of today, November 6, 2008, so time sensitive information may no longer be accurate at the time of any replay.

Now, I'll turn the call over to Sam Susser, our CEO.

Sam Susser

Thanks, Chip and good morning, everyone. Along with us on the call this morning are Steve DeSutter, who joined Susser Holdings in June as the President and CEO of our Retail Division; Mary Sullivan, our CFO; and other members of our management team.

First, I'd like to make a couple of general remarks about the quarter and our view of how our company has faired in the phase of some very strong headwinds that are impacting the national economy.

We reported very strong numbers across all our businesses in the third quarter. Two hurricanes hit us directly and we still managed to produce one of the strongest quarters in our history.

Our same-store merchandise sales grew by 6.7% on a pro forma basis, which is near to top end of the average growth range we've seen over the last 10 years. This increase was on top of a 9.1% pro forma same-store increase in the third quarter of 2007.

We're using the term pro forma whenever we're in comparing against 2007 results assuming Town & Country was in the numbers for all of last year.

Our merchandise margins grew from 33.1% pro forma a year ago to 34.9%, which is the highest margin we've seen in seven years. These numbers reflect a continuation of strong trend in the merchandise business that we established early in the year.

And they demonstrate a successful integration of Town & Country as well as relatively stable economies in the markets where we operate in Texas, New Mexico and Oklahoma. They also speak to the particular characteristics of our business as compared with some other types of specialty retail operations you may own or follow.

No doubt, during the past quarter, our customers were feeling the pinch of higher gasoline prices, food prices and reduced real estate-related activity. But the merchandise sales increases we've been seeing all year, illustrate that our customer spending habit inside Stripes convenience stores are not terribly dependent or correlated on whether the overall economy is on an up swing or down swing.

Our customers continue to respond to our ability to provide the basic products and delicious food they want, at a price they want in a store setting that makes them to Stripes over the other convenience store down the block. I think our numbers demonstrate that we're doing a good job of [attending] to our business.

The same is in, and that's really true for consumer behavior on the outside of our stores. Last quarter, we talked about how fuel volumes had softened, as retail street prices hit $4 a gallon, especially along the Texas Mexico border.

We saw a continuation of this pattern during the third quarter as pro forma average fuel volumes declined by more than 6%. In the fourth quarter as gasoline prices have fallen below $2 a gallon in some markets, we're beginning to see volumes rebuild. So that’s a very positive development.

Fuel volumes and merchandise sales were also negatively impacted by Hurricane Dolly, which hit the lower Rio Grande Valley in July and Hurricane Ike, which hit the Houston and Galveston area in mid-September.

Despite the negative impact of two hurricanes, it was a great quarter with some of the highest fuel margins we've ever seen and we produce some of the strongest merchandise trends in our company’s history.

Mary will give some additional detail on the operational and financial impact of the two storms in a moment, but I want to say how grateful we are that none of our employees were hurt and our business is essentially running at full speed today.

Our teams put in a tremendous amount of work to prepare our stores, to prepare our offices for the onslaught of these hurricanes and to recover and restore operations after the storms move through.

I cannot overstate my deep appreciation for the inspiring job our team did under some extremely trying circumstances. When many of our team mates didn’t have electrical power or water at their homes, they are dealing with down trees and root damage and other problems and they got us going very, very rapidly.

Looking ahead, we've got a good start on the fourth quarter. We're going up against our pro forma same-store merchandise sales increase of 11.4% in '07, yet we continue to see a healthy traction in our merchandise sales and margins.

As always, we're going to walk through our markets very closely and respond quickly to any shifts we seen in traffic or spending patterns. Although, falling energy prices could reduce drilling activity in the oil patch towns.

Overall, lower energy crisis could help us going forward. We're already beginning to see the positive effect of lower gasoline prices on our sales volumes. The standalone energy prices will also reduced our utility expense and our credit card fees, which will be a very welcome development.

Now, I'd like to ask Steve DeSutter, President of our Retail Division to share a few more highlights about the quarter.

Steve DeSutter

Thank you, Sam, and good morning, everyone. Our growth in the third quarter was strong in both legacy Stripe stores and in our Town & Country stores, which we acquired last November, in fact, since our sales growth was highest in the west, reflecting the continued positive impact of strong regional economy and operational improvements in staffing and stocking of high demand merchandise.

We break merchandise and food service into approximately 22 categories. And the categories shown in the largest same-store sales increase in the third quarter were food service, beer, cigarette and snacks.

During the quarter, approximately 80% of these categories representing just over 90% of all merchandise sales were up on a same-store basis, which demonstrates strong sales trends pretty much across the Board.

During the third quarter, we opened one new retail store, which is equipped with Laredo Taco Company restaurant. We also had one planned store closing. So far, in the fourth quarter, we've opened two more stores with restaurants and be retrofitted an additional existing Stripe store with the Laredo Taco Company restaurant. We also have another four retail stores currently under construction.

We recently completed the rebranding of the first three Town & County stores to the Stripes retail brand. We've planned to use these first three stores as prototypes as we move forward with our plan to rebrand the balance of the Town & County system beginning in the first quarter of next year.

Other key initiatives that are underway include, equipping the first 50 Town & County stores with ice makers, which is improving our margin on ice sales and enabled us to use ice barrels upfront to increase the sale of beverages. Another 30 to 40 stores will be equipped with ice makers in 2009.

By the end of 2008, we expect to have all our stores operating on the latest version of software available to our point-of-sale system using the VeriFone/Sapphire version.

We are investing just over $2 million in the Sapphire upgrade. With this investment, we expect to achieve several efficiencies including lower IT support cost with a single technical platform that allows installation of remote upgrades. In addition the Sapphire upgrade will give us enhanced capability to capture individual market basket data on a first store basis.

Also during the third quarter, we successfully completed a test of the KSS fuel pricing system in our west Texas stores and we'll be rolling it our in the legacy Stripe stores, and expect to be live in all retail stores with a number of our hotel dealers as well by the end of January 2009.

KSS gives a tool to analyze daily competitive fuel pricing information from each store location and then provide fuel price recommendation that will help us optimize price and fuel volume relationships at each of our locations.

And now, I'll turn it over to Mary.

Mary Sullivan

Thanks, Steve. Good morning, everyone. Rather than walking you down the income statement, I'd like to cover just few of the highlights and spend a little more time discussing our balance sheet and liquidity position.

With all the turmoil we're seeing the banking sector, we know that liquidity is on everyone's mind. And I am pleased to say we're in very good shape in that regard. I'll come back to that in a moment.

First, looking at a couple of key financial metrics from the third quarter. Net income was $6.9 million, or $0.40 a share, and this is up from earnings of $5.5 million, or $0.33 a share a year ago on a pro forma basis.

The biggest drivers of this increase were the higher merchandise in fuel margins in contribution to the newly built stores, partly offset by higher interest expense on the Town & Country debt and the higher income tax expense we've talked about in the last few quarters.

Adjusted EBITDA was $31.8 million, which is up about 1% from a year ago on a pro forma basis. If you add back rent expense to normalize the effect of our sale lease back, EBITDAR was $40.5 million in the third quarter, which is up 3.4% from a year ago on a pro forma basis.

Sam mentioned the two hurricanes we had in the third quarter. We estimate we incurred between a $0.5 million and $1 million in incremental expenses from merchandise spoilage, maintenance, generators, overtime and incidental expenses such as meals and lodging.

Most of these expenses already reflected in the third quarter. We estimate the capital replacement costs are going to be about $2 million to $3 million and most of that was from Hurricane Dolly, which hit near Brownsville where we have a concentrated number of stores.

We talked a little about the excepted impact of Dolly on our last call and our estimates have not changed significantly. We spent $300,000 of this amount in the third quarter, primarily reflecting [signs and route].

We shuttered a 144 of our retail stores during these storm for an average of about two days each. We lost 297 stores days which is less than 1% of the total retail store days during the quarter.

Most of our wholesales dealers are in the Houston area and they were also impacted by Hurricane Ike, but over 70% were back in operation within a week following the storm. Seven dealer locations that sustained extensive damage to the stations also closed however.

Our wholesale fuel division is based in Houston and we face some pretty big challenges after Ike in terms of housing, staffing and getting fuel supply across the region. Because refineries in the fuel racks in Houston were down for many days. It was quite a procurement and a logistic challenge to find fuel from other cities and hold that fuel where it was need.

But I am pleased to say, that we were generally able to supply our stores and our dealers, although sometimes at a higher costs in the first few weeks after the storm.

Before I move on to the balance sheet I wanted to touch on a couple of expense items. Utility costs have been challenging for us this year as they have risen along with the other energy prices and are up $3.4 million for the quarter on a pro forma basis, or $2.5 million on a same-store basis.

Credit card expenses for third quarter was $0.052 a gallon versus $0.034 a year ago on a pro forma basis, or $2.8 million increase to operating expense. We anticipate that our fees in the fourth quarter will come down based on the substantially lower pub prices we're currently seeing.

Now, turning to the balance sheet, I am pleased to say we are in a very comfortable position from a financing standpoint. Balloon payments on the revolver and the term loan to finance Town & Country don't come due until November 2012. Our required principle payments for 2009 are approximately $9.2 million.

The $300 million of senior notes currently outstanding don't mature until December of 2013. Although, we do have the option to call them back at a premium, beginning in December 2009. So, with the exception of interest payments, and it's a modest amount of annual amortization, we won't have to refinance or retire any debt for another four years.

At the end of this -- at September, we had $60 million of unused availability against a $120 million revolver. We had since repaid the outstanding borrowings, so we now have about $80 million of liquidity available under that revolving credit facility. As of last night, we had nothing borrowed on the revolver and we had approximately $18 million of excess cash invested.

Our daily cash position does swing quite a bit within the month, but lower fuel prices are certainly helping to reduce our (inaudible) need. We expect to complete another $8 million to $14 million of sale lease backs before the end of the year, to finance new store growth. Even though this market has tightened, we anticipate that we will still be able to access this source of capital.

Now, I'll be happy to cover any detailed questions you have on the financials during the Q&A, but for now, I will now turn it back to Sam.

Sam Susser

Thanks, Mary. Before we take your questions, I'd like to direct you to some updates we made for our 2008 guidance. For average gallon sold per retail store, we pinned that up to range a flat to a positive 3% increase. We raised our range for retail fuel margins to $15 to $17.5 a gallon. We also raised wholesale fuel margins to a range of $5 to $6.5 a gallon.

We reduced our new store comp for the year slightly, back to 11 to 12 stores. Today, we've opened nine stores including two that we opened in the fourth quarter. Four more under construction and we expect subject to weather conditions that three of those stores will open before the end of the year.

We've reduced the top end of our gross CapEx estimate by $10 million to a new range of $65 million to $75 million and depending on the number of sales [restacks] we do in the fourth quarter that implies net capital spending of $30 million to $36 million.

We have not finalized our 2009 operating and capital budgets yet. I can tell you that we expect to continue to grow same store sales and to continue to build our market share with more new stores.

We’ve been very active in acquiring and developing land sites for future stores. Our liquidity position is very strong and we have plenty of opportunities to pursue higher market share in our primary markets in 2009.

If economic conditions do deteriorate our markets, we’ll be fast in adjusting our spending plans to meet the change in environment. Our focus continues to be on enhancing the customer experience every day to improve the execution, employee training.

We're going to continue to invest in our technology, our brands and our people. And we are going to continue to build new market share by constructing more state-of-the-art big box stores and expanding our dealer network.

Operator, we're ready for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes form the line of John Lawrence with Morgan, Keegan. Please go ahead.

John Lawrence - Morgan, Keegan & Company

Good morning.

Sam Susser

Good morning John.

John Lawrence - Morgan, Keegan & Company

I don’t know, Sam, if you want to take this or Mary goes through it. But if you walk through and just on the operating expenses a little bit, Mary you broke out some of those and certainly, could we just run back through some of the increases. I mean, obviously credit card, you called that was about $3 million?

Mary Sullivan

Right. Credit card is healthy, John, where we are seeing the challenges this year in the operating expenses.

John Lawrence - Morgan, Keegan & Company

Right. And then, you are throwing, say, $1 million from the hurricane additional expenses, so would that be about $4 million to $5 million, right there?

Mary Sullivan

[No].

John Lawrence - Morgan, Keegan & Company

If you put the credit card utilities.

Sam Susser

Bring those buckets John, utility costs were up about $3.4 million...

Mary Sullivan

3.4.

Sam Susser

….utility costs.

John Lawrence - Morgan, Keegan & Company

Okay.

Mary Sullivan

And credit card were up 2.8.

John Lawrence - Morgan, Keegan & Company

Okay.

Mary Sullivan

At this pro forma last year.

John Lawrence - Morgan, Keegan & Company

Yeah. Okay. Then, if you put in the $1 million from the hurricane, so that explains a lot of that going at this point?

Sam Susser

Those are the big drivers in our operating expense lines and [run rate] two big things, the utility cost and credit card cost. Utilities is for us really tied to the natural gas price, but it lags. It will be 60, 90-day kind of lag before we see improvement in natural gas rolling through the P&L…

John Lawrence - Morgan, Keegan & Company

Right.

Sam Susser

…vice versa is on the way up. And credit card fees, that's real time. So that's very, very much a direct relationship to the retail price of a gallon a fuel.

John Lawrence - Morgan, Keegan & Company

And just to comment quickly on the, if you will, I know we've talked at length about the Town & Country source getting better end stocks on certain products. I would assume that that led the part of this improvement. Is that still part of the [route] structure et cetera?

Sam Susser

We are seeing enormous increases in Town & Country and the package beverage area, healthy increases in salty snacks, beer and cigarettes including our private-label cigarette have been a big contributor. And we don’t break out (inaudible) here, but I would say that we are starting to see some improvement in the food service side at Town & Country. That’s starting to get better, continue to think that that’s a multiyear journey for us. But we're starting to get some traction now.

John Lawrence - Morgan, Keegan & Company

Thanks a lot. Good quarter.

Sam Susser

Thanks a lot John.

Operator

Thank you. Our next question comes from the line of Bryan Hunt with Wachovia. Please go ahead.

Bryan Hunt - Wachovia

Good Morning

Sam Susser

Hi, Bryan.

Bryan Hunt - Wachovia

How are you Sam?

Sam Susser

Doing great.

Bryan Hunt - Wachovia

I was wondering if it was possible for you to quantify the impact to your dealer business from Hurricane Ike. It sounds like there is a ton stores down getting access to fuel as a nightmare. Is there anyway you can sum that for us?

Sam Susser

Bryan. It doesn’t lead itself to quantifying the impact because of the hurricane. Certain suppliers were – we were very advantaged in certain relationship and in other areas we were disadvantaged. And we had tremendous challenges, as did our suppliers in just getting fuel to stores.

But to try to quantify it, I wish we could but you kind of have to go back and figure out what fuel prices would have been if the hurricane hadn’t happened. And we are talking about giant dollar, two dollar per gallon swings depending on up and down and depending on which supplier. And there is just no way to put numbers on it.

The end of the quarter, it all netted out to a wonderfully solid quarter. I think, we're solved to a couple of million gallons of wholesales fuel volume, what we would have been if the hurricane had not happen and we that not had all outages. But I can't really, began to estimate what the real impact was on the fuel margin.

Bryan Hunt - Wachovia

All right, great. And then looking at food service continues to be a growing business for you all. And I know, those wonderful in-store made tortillas are – smells great when you walk in the door. I mean, you've had flour cost down, a lot of other commodities drop precipitously since, call it July or August.

Is there anyway for you to secure some of those costs or are you beginning to see the benefits from some of those declines?

Sam Susser

We are starting to see the benefits. The biggest commodity component for us in the food side is eggs. And that's trending better than it was six months or a year ago. And we are continuing to being very aggressive on our food service program in terms of go-to-market strategy.

And we think that's a fantastic the positioning with economy on all consumers minds. There is just no better place at all to get a delicious compelling value than at Laredo Taco. We've been holding our line on retail in street pricing, when we were feeling the commodity pressure and now its' obviously gotten a little better.

Bryan Hunt - Wachovia

Can you talk about what you are doing in terms of promoting that business to communicate the value to the consumer, that may have not stepped into your store before?

Sam Susser

No. We are rolling out a new stronger signage package. That's pretty much worked its way into the system, that really focuses on our value items. We have some bundling promotion going on. We also have kind of some two for specials that we are promoting.

We’ve made use of radio in a meaningful way in recent months and we're watching all this restaurant same-store sales reports and looking at our number like crazy. And we're just grateful that our food business continues to perform very healthy, very strong and we are working it.

Most importantly is the blocking and tackling of operations in the stores. It’s still a new business for us. And we're kind of adolescent that are (inaudible) to get this business right hopefully in the years ahead. And we’ve seen a lot of room for just operational improvement to help continue to drive sales growth and margin growth and that’s what we are doing.

Bryan Hunt - Wachovia

I’ll get back in the back in the queue. Thank you Sam

Sam Susser

Thank you, Bryan.

Operator

Thank you. Our next question comes from the line of Anthony Lebiedzinski with Sidoti & Company. Please go ahead.

Anthony Lebiedzinski - Sidoti & Company

Good morning. I had a couple of question. Mary had mentioned before in your prepared remarks that your sale lease backs, some of the terms that have tightened. Can you just give us a little bit more color on that topic?

Sam Susser

Anthony, this time of the pricing in that market is clearly got more expensive versus a year ago. Having discussions and negotiations with different parties I don’t think it’s appropriate to get into exact specifics right now. The market is open to us and we're having dialogue, good positive dialogue and we are on the pathway to closing a number of transactions here in the fourth quarter. But clearly pricing is a little more expensive than a year ago.

Anthony Lebiedzinski - Sidoti & Company

Okay. And also, you did premiere store openings for this year by a couple of locations what's the primary reason for that?

Sam Susser

The primary reason really is issues with platting and curb cuts and development and just the timelines. We have plenty to do and integrating or absorbing Town & Country also this year, plenty. And to the extent that we have slowdown a couple of three stores this year and they get done next year, that feels pretty comfortable to us given the overall growth profile of Susser's business over the last couple of years and in the next couple of years.

Anthony Lebiedzinski - Sidoti & Company

Okay. And also the price of oil has been cut by more than half from its peak. How does that impact on the economy in West Texas? What's your view on that?

Sam Susser

We have not seen any slowdown in our numbers and we're certainly looking for it. These are just rough numbers and 168 units in Town & Country and about a third of those are in, what I'll call, oil patch community like Midland, Texas; Odessa, Texas; Hobbs, Roswell, New Mexico.

And we're going to keep a very, very close eye on sales trends in those markets and adopt as needed. And if we see a crude oil fall into 30 or 40 bucks, we would expect there to be a material reduction activity in those communities, no doubt. But that would be a giant tax cut for consumers. They comprise 80% of the other stores.

And net-net, I think our business would be stronger in a $30 a barrel crude oil environment than in a $130 a barrel crude oil environment. But it would certainly vary by market and that’s one of the reasons why we were so excited about the opportunity to bring Town & Country into the Susser family because the geographic diversity it gives us. And I think it makes us a stronger business.

Anthony Lebiedzinski - Sidoti & Company

Got you. Okay, and then I know that you are complying with all your debt covenants issues as you had said in your press release. So can you just go over what those debt covenants are?

Mary Sullivan

Anthony, we have a fixed charge coverage and a leverage component of our covenants and we are meeting both of them handily with plenty of EBITDA cushion.

Anthony Lebiedzinski - Sidoti & Company

And my last question is regarding Town & Country. I think most of those stores were selling wine at some point. Have you discontinued selling wine at those locations?

Sam Susser

Discontinued at some and it has been materially, materially, materially reduced in other stores.

Anthony Lebiedzinski - Sidoti & Company

Okay. And you replaced that with more beer right?

Sam Susser

We replaced them with more packaged soft drinks displays and products and also beer and snack and caps.

Anthony Lebiedzinski - Sidoti & Company

Got you. Okay, thank you.

Sam Susser

Thank you, Anthony.

Operator

Thank you. Our next question comes from the line of Radina Russell with JPMorgan. Please go ahead.

Radina Russell - JPMorgan

Good morning, Mary, Sam. Quick question for you. Can you talk a little bit on Town & Country with respect to remodeling the stores? Have you outlined a plan for that yet?

Sam Susser

We have not outlined a plan. We have just completed three different prototype remodels, two in Brady and one in Abilene, Texas. And along with some members of our Board, management team just caucused out there and spend some time studying it. We are very excited about it and we will launch that process, in 2009, probably take a couple of years to get it done.

We could do it faster, but we are very mindful of liquidity and capital. And we want to be sure, we don't get ahead of ourselves in any which way. And so, we might elect to spread it out, given we're also have very, very positive investment opportunities on the new store side et cetera.

Radina Russell - JPMorgan

Okay. And then one quick question with regard to Laredo Taco. You spoke a little bit about a food cost coming down and obviously you guys are doing well with the Laredo Taco business. Do you think that with your, I guess, value kind of proposition that you go forward with, do you have the ability do you think to hold prices firm, even as the food cost are coming down?

Sam Susser

Yes. And in a nutshell.

Radina Russell - JPMorgan

All right. Well, great quarter guys, thanks.

Sam Susser

Thanks, Radina. We feel real solid position on our Laredo Taco strategy. What we're doing is working and we want to stay at it.

Radina Russell - JPMorgan

Got you. Okay. Great, thank you.

Operator

Thank you. Our next question comes from the line of Mike Smith with Kansas City Capital. Please go ahead.

Mike Smith - Kansas City Capital

Good morning. Sam, those 220 stores that you have without the food service facilities, how many of those are likely, let's say, three years from now to have food service in them?

Sam Susser

Mike, it's probably 10 to 20 just to venture a guess. But every new store that we build will have food service. And so, today about 57% of our stores have restaurants. I hope that we start to approach 70%-80% in the next three or four years.

We close a few stores every year that we call out of the bond portfolio those tend to be units without restaurants. While we do add restaurants existing units every year and we build new stores with restaurants.

Mike Smith - Kansas City Capital

Okay, thank you.

Sam Susser

Well, thank you.

Operator

Thank you. Our next question comes from the line of Andrew Berg with Post Advisory Group. Please go ahead.

Andrew Berg - Post Advisory Group

Hey guys, I get older when something misses. Just with respect to CapEx spending. Mary, what was CapEx in the third quarter and then in terms of the stores that are going to be opened, I know the press release talked about I think four that were under construction. Do those end up getting opened this quarter or does that fall under the first quarter of next year?

Mary Sullivan

Let me start with the second question first, Andrew. Of the four that we currently have under construction, two or three of those will get open this year. Two for sure, the third one we think will get open but it’s going to be dependent on weather conditions in December. If it doesn’t open in December it will be early January.

Andrew Berg - Post Advisory Group

Okay. And then CapEx in the quarter was worth?

Mary Sullivan

CapEx in the quarter was, I am not sure that we’ve quickly do as a quarter number. For the year-to-date, Andrew, it’s $45.5 million on gross CapEx and after sale lease backs it’s been $17.8 million year-to-date. Bear with me a second and I’ll find the quarter number for you.

Andrew Berg - Post Advisory Group

It’s 45.5 as gross.

Mary Sullivan

Yes, 45.5 gross for the quarter $8.2 million capital spending for the third quarter.

Andrew Berg - Post Advisory Group

Okay, thank you.

Operator

Thank you. Our next question comes from the Chris Smith with SCM Advisors. Please go ahead.

Chris Smith - SCM Advisors

Good morning. Thanks for taking the call. I am curious on the sale lease backs activity for Q4, what's driving the decline on that front? Is it the pricing environment?

Sam Susser

No. we do sale lease backs kind of lined up against our new store build activity. And so, the overall number of sale lease backs we do in a year reflective of the number of new stores that we've build in the previous year kind of thing. And it's a lumpy process.

Sometimes we are doing sale lease backs in the package, so we've build up four or five stores that we intend to sale lease backs and we do one transaction all at ones, and sometimes we do sale leaseback transactions singly with an individual investor, perhaps somebody has got a 1031 gain that sort of thing.

Chris Smith - SCM Advisors

Okay. Because I think at the end on the Q2 call, I think you said for the remainder of the year you had some likes $45 million a transactions or received commitment?

Sam Susser

We had obtained a $45 million forward commitment from one of our financing partners to do sale lease backs in the following year. And we were very pleased to have that commitment in hand as we continue to build out stores, new stores but we're not planning on drawing down on that entire commitment this year.

Chris Smith - SCM Advisors

Okay. I must have misunderstood. I thought it was for the second half.

Sam Susser

No. That was a forward financing commitment that we obtained and shared with the investor very upon that call.

Chris Smith - SCM Advisors

And that's for 12 months, is that….

Sam Susser

12 months yeah.

Chris Smith - SCM Advisors

Okay. Thanks.

Sam Susser

Thank you.

Operator

Thank you. (Operator Instructions). And our next question comes from the line of Bryan Hunt with Wachovia. Please go ahead.

Bryan Hunt - Wachovia

Yes, Sam

Sam Susser

Hi Bryan

Bryan Hunt - Wachovia

Hi. Just a follow-up. Could you talked about how many greenfields you may have in your land bank and then the total owned locations as of the end of the quarter.

Sam Susser

Bryan, we have 18 sites in our land band as of today. And in the retail, we have 242 sites that are [free] properties, that are operating retail sites, and in the wholesale division, we have 44. Operating wholesale where we own the properties and fields. Correct.

Bryan Hunt - Wachovia

Great. And then just to talk about fuel along the Mexican border, in your border town stores, could you talk about may be how bad same-store gallons where at the trough and where you are today relative to the trough.

Sam Susser

Well, on a pro forma basis, last quarter we were down 6% for the company and it was much, much, much worse along the border, it really wasn’t so bad elsewhere. I just assume that break it up specific numbers by region. But here in recent weeks as I am sure you have seen in the national press, retails along the Texas/Mexican border were very fast to fall below $2 and the selling price is less than $2 a gallon. And I believe that it is slightly below prices available in Mexico which makes a huge difference. That's as of today.

Bryan Hunt - Wachovia

Great. I appreciate the additional color and thank you. Have a good day.

Sam Susser

Okay, Bryan, thanks for being there. Everybody thank you all for dialing in and appreciate your time. As we approach the next year, I am really excited about the opportunities we have, to enhance off [relations] and keep growing our company. We will now, fully realize in the benefit of the synergies. We've outlined the past calls from the integration of Stripes and Town & Country.

As Mary talked about, from a liquidity standpoint, we are on a very strong financial [pudding], which feels really good, given the macroeconomic situations playing out. Thanks for your interest in the company and we welcome the opportunity to share your stores and come have Taco's with us. Thanks a lot everybody.

Operator

Ladies and gentleman, this concludes the Susser Holdings Corporation third quarter earnings conference call. This conference will be available for replay after 1 PM Eastern Standard Time today through November 13th, at Midnight. You may access the replay system at anytime by dialing 303-590-3000 and entering the access code of 111-21209#. Thank you for your participation and you may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!