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Susser Holdings (NYSE:SUSS)

Q1 2014 Earnings Call

May 07, 2014 10:00 am ET

Executives

E. V. Bonner - Executive Vice President, General Counsel and Secretary

Sid Keswani - Senior Vice President of Store Operations

Rocky B. Dewbre - Executive Vice President, President of Wholesale and Chief Executive Officer of Wholesale

Mary E. Sullivan - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Treasurer

Sam L. J. Susser - Founder, Chairman, Chief Executive Officer and President

Analysts

Irene Nattel - RBC Capital Markets, LLC, Research Division

Bonnie Herzog - Wells Fargo Securities, LLC, Research Division

Dane Leone - Macquarie Research

John R. Lawrence - Stephens Inc., Research Division

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Scott Andrew Mushkin - Wolfe Research, LLC

Benjamin Brownlow - Raymond James & Associates, Inc., Research Division

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Susser Holdings Susser Petroleum Partners' First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Wednesday, May 7, 2014. I would like to turn the conference over to Chip Bonner, Executive Vice President. Please go ahead, sir.

E. V. Bonner

Thank you, operator. Good morning, everyone, and thanks for joining us. This morning, we released our first quarter 2014 earnings for both Susser Holdings Corporation and for Susser Petroleum Partners. A reminder that today's call will contain forward-looking statements. These statements are based on management's beliefs, expectations and assumptions and include the company's objectives, targets, plans, strategies, costs and anticipated capital expenditures. They are subject to risks and uncertainties that could cause the actual results to differ materially as described more fully in the company's filings with the SEC.

During today's call, we will also discuss certain non-GAAP financial measures that we believe are helpful for a full understanding of our financial performance. Please refer to our news release for reconciliation of each financial measure.

With me on the call today are Sam L. Susser, Susser Holdings' CEO; Rocky Dewbre, CEO of Susser Petroleum Partners; Sid Keswani, our Senior Vice President for Retail Operations; and Mary Sullivan, our CFO; and other members of our leadership team.

As you are probably aware, last week, Susser Holdings agreed to be acquired by Dallas-based Energy Transfer Partners in a cash and units transaction valued at about $1.8 billion. We expect to close in the third quarter, pending approval by Susser Holdings' shareholders and other regulatory clearance.

On today's call, we won't be able to comment on additional details of the transaction, the timing of the integration or the dropdowns to SUSP, executive staffing changes and the like. Beyond that, what was disclosed in the news release, subsequent 8-K filings and joint conference call we held on April 28, so please keep that in mind as we enter the Q&A portion in a few minutes.

We have rescinded full year 2014 guidance for SUSS and as is customary for publicly traded companies that are being acquired. Given that Energy Transfer has started -- has stated that its plans to begin dropping down Susser Holdings and Sunoco operations into SUSP shortly after closing, we have also rescinded our original full year 2014 guidance for SUSP because we don't have a clear line of sight as to what SUSP will look like in the latter half of the year.

After closing, any future dropdowns are subject to market conditions and approval of SUSP conflicts committee. A reminder that the information reported on this call speaks only to the company's view as of today, May 7, 2014, so time-sensitive information may no longer be accurate at the time of any replay.

Now I'll turn the call over to Sid Keswani, Senior Vice President of Operations at Stripes.

Sid Keswani

Thanks, Chip, and good morning, everyone. Thank you for joining us on this call. Let me begin with a brief look at our Q1 results for retail operations. We delivered solid performance on the merchandise side of the business during the first quarter despite the fact that it was much colder and wetter than normal, including the March spring break period.

Same-store sales increased 1.9% over last year or 6.1% on a 2-year stack basis. Easter fell in the second quarter this year versus the first quarter last year, so if you normalize the impact of the calendar change, we estimate it would have increased our same-store sales growth by about 50 basis points. We have already realized the benefit of this in the second quarter.

Merchandise margin was a very solid 33.9% versus 33.1% a year earlier. This is primarily due to the favorable mix changes driven by our solid growth in food service and some improvement in shortage control. Average fuel gallons sold per store increased 2% versus 4.1% a year ago. This metric includes all stores and is up 4.2%, excluding the Sac-N-Pac stores, which have average fuel volumes that are currently 60% of Stripes' levels.

Overall, personnel expenses were 21% of merchandise sales versus 21% -- 20.6% a year ago. The overall increase in Q1 is due to several factors, including a shift towards more food service, which acquires about 2 to 3x of labor as a percent of sales versus traditional convenience store merchandise; lower-than-expected top line growth, due in large part to the cold wet weather; labor inefficiencies related to ramping up new Stripes stores we have opened over the last 6 months; extra labor and travel costs for our store managers and area managers that mentored the new teams at the Sac-N-Pac stores that we purchased at the end of January; and higher health care costs. The Affordable Health Care Act is adding about $3 million to $4 million annually to our health care costs.

These headwinds were offset by continuous improvement in the management of labor hours worked versus our staffing model, careful management of our wage rates and a significant increase in the ratio of part-time versus full-time for new hires this year.

The team has been focused on labor control, and sequentially through the quarter, we saw improvement each month. We opened 2 new Stripes stores in the first quarter in addition to adding the 47 Sac-N-Pac stores in January through acquisition. As of today, we have a record 17 new stores under construction, so we will be bringing on a lot of stores later this quarter and in the third quarter.

So far in the second quarter, we have reopened 2 acquired stores in Central Texas, one in Bryan, Texas, and the other one in Llano, Texas. Last month, we completed the initial merchandise resets at all Sac-N-Pac locations, bringing their product mix closer to the Stripes offering. We expect the merchandise resets and our close working relationship with the key suppliers will drive significant growth in our merchandise sales over the next 2 years.

We currently operate 631 convenience stores and more than 400 have restaurant locations. Food service is and will continue to be an important focus for our c-stores because it typically drives the purchase of other high-margin items like drinks and snacks. In the first quarter, food service, nonalcoholic packaged drinks and snacks represented 46% of the merchandise sales and 60% of the merchandise gross profit contribution.

And now I'm going to turn it over to Rocky Dewbre for a more detailed look at our wholesale business. Rocky?

Rocky B. Dewbre

Thanks, Sid. Good morning, everyone. Our wholesale fuel business continued to perform very well last quarter. As a result, we were pleased to announce the fourth consecutive increase in our quarterly distribution at Susser Petroleum Partners, an increase of 3.5% versus the prior quarter to $0.502 per unit or $2.01 on an annualized basis. $0.502 was a $0.065 and 14.8% increase over the distribution we paid last May.

Based upon distributable cash flow of $14 million, this reflects a coverage ratio of approximately 1.27x for the first quarter and coverage of 1.22x for the trailing 4 quarters. Susser Petroleum Partners delivered robust first quarter performance, with an 18% year-over-year growth in fuel gallons sold and a 42% increase in gross profit. The partnership continues to generate solid growth in fuel volumes and rental income through our existing and acquired sites, resulting in increased distributable cash flow and distributions.

An important part of the year-over-year growth was driven by the Gainesville Fuels and 3W Warren Fuels acquisitions that we completed over the last 9 months. For the Sac-N-Pac/3W Warren Fuels acquisition, we increased our third-party volume, with the addition of 19 new dealer sites, and our volumes sold to affiliates increased through the addition of 47 Sac-N-Pac stores that are operated by Stripes.

Volumes sold by the partnership to affiliates, which includes volumes sold by the partnership to Susser Holdings for resell at Stripes and Sac-N-Pac stores and independently operated consignment sites, increased 11% year-over-year to 278 million gallons. This reflects very strong volume at new Stripes stores, healthy growth trends at existing Stripes stores and at our dealer-operated consignment locations.

Volumes sold to third parties, including independent dealers and commercial customers, increased 34% to 156 million gallons. Gross profit on these third-party sales increased 53% to $8.8 million or to $0.057 per gallon compared to $0.05 per gallon a year ago. The margin improvement per gallon was driven by higher-margin commercial fuel gallons, primarily from the Gainesville Fuels gallons -- gallon mix, as well as higher margins on other commercial gallons.

We added 27 new contract dealers last quarter, including the 19 acquired locations and we discontinued 2. This brings our independent dealer count to 616 at the end of March, which includes 517 supply sites and 13 consignment sites, in addition to the 86 consignment sites supplied by Susser Holdings.

Average fuel margin for all gallons sold by the partnership on a weighted average basis increased to $0.04 per gallon compared to $0.036 per gallon a year ago. Again, this mainly reflects the strong margins on the Gainesville Fuels volumes we sell to Permian Basin producers. Partnership gross profit totaled $22 million, up 42% year-over-year.

Rental income continues to increase as SUSP completes additional purchase and leaseback transactions with SUSS. In the first quarter, rental income contributed $3.9 million to gross profit, accounting for almost 18% of the partnership's total gross profit.

We completed dropdown transactions for 7 Stripes stores during the first quarter of $27.5 million and 2 more in the second quarter for $8.5 million. Since the IPO, we have acquired a total of 42 Stripes stores for $169.6 million and will produce annual rental income of approximately $13.6 million for the partnership plus the $0.03 per gallon margin on fuel volumes.

The relationship with Stripes plus the outstanding work led by our Chief Operating Officer, Gail Workman, has increased our organic growth, improved our customer service and added scalability to our platform. The net result is that adjusted EBITDA for the partnership was $15.7 million in Q1, up from $11.2 million a year ago and up more than 11% versus the fourth quarter. Distributable cash flow totaled $14 million, representing a 35% increase over the prior year period.

Now I'll turn the call over to Mary Sullivan for a few comments on the consolidated financials. Mary?

Mary E. Sullivan

Thanks, Rocky. Good morning, everyone. To summarize the consolidated financial results for Susser Holdings, this morning, we reported a first quarter net loss of $1.8 million or $0.09 per diluted share versus a net loss of about $230,000 or $0.01 a share for the first quarter of last year.

As Sid mentioned earlier, the warm weather quarters are our strongest, and the cold weather quarters are our weakest year in and year out, both for merchandise sales and for fuel margins. The first quarter was no exception, and we were comping up against strong numbers for the last couple of years.

Adjusted EBITDA totaled $29 million, which was down 8.8% from a year ago. EBITDA performance was significantly impacted by lower retail fuel margins, which were $0.036 lower than a year ago when we experienced record first quarter retail fuel margins of $0.166 per gallon. However, our first quarter retail fuel margin was still $0.018 higher than the average margin for the previous 5 years of $0.112 per gallon. As a reminder, we post our historical quarterly fuel margins on our website.

We did mitigate this quarter's retail fuel margin decline with higher inside gross profits and maturation of our new store base. Fuel margins will always be volatile on a quarterly basis, while merchandise gross profit is far more stable. For the LTM period, nonfuel gross profit represents 65% of our retail division gross profit.

Looking at some of the key expense lines. Most of the increases were related to the growth in our retail and wholesale business over the last 4 quarters. G&A expense was up $3.4 million year-over-year. About half of that increase represents higher noncash stock compensation expense that is driven by our strong stock price performance. Other increases generally were related to additional costs of supporting our growth from Gainesville, Sac-N-Pac and acceleration of new store growth at Stripes.

For Susser Petroleum Partners specifically, approximately 70% of the additional G&A and operating expense is related to the Gainesville Fuels business we acquired in September. Interest expense dropped by $6.9 million to $3.2 million in Q1 due to the reduction of our senior notes last spring. Our effective tax rate for the first quarter was approximately 30%.

Turning to the balance sheet. Our consolidated revolver borrowings increased by $132 million since year end, with the majority of that increase funding growth CapEx, including new stores, land bank and the Sac-N-Pac acquisition.

With almost $13 million in outstanding LCs and $24 million cash on the balance sheet, our total available liquidity is $384 million. Consolidated CapEx during the first quarter was $139 million, which includes approximately $88 million for the Sac-N-Pac acquisition and $33 million related to new store construction and land purchases. The partnership capital spending was approximately $31 million, which includes $163,000 in maintenance capital and the balance for purchase of Stripes stores and other growth investments.

I'd like to turn the call over to Sam for a few closing comments before we open up the line for questions.

Sam L. J. Susser

Thanks, Mary. And I want to thank each of you for being with us this morning and for being such an important part of our company's growth since we became a publicly traded company 7.5 years ago.

Before we take questions, I want to reiterate this is a very bittersweet moment for the Susser family. We consider ourselves incredibly blessed to be a part of a team that has grown this business from a couple of stores that my grandmother inherited over 76 years ago to a Fortune 500 operation. Personally and selfishly, my wife Catherine and I really love the way things are today and would have been very, very happy with the status quo. That said, Energy Transfer presented a compelling proposal for our shareholders at SUSS, our unitholders at SUSP, as well as for our leadership team.

Pairing Stripes and Laredo Taco Company with Sunoco, one of the great fuel brands in the United States, with the capability and resources of the Sunoco and ETP family, tees up our company for a tremendous future. We've been dedicated to developing a team that is truly a leader amongst our peers, strives to respect each and every individual team member, runs every store on one-at-a-time basis and is built on a robust scalable, low-cost technology platform. Combined with Sunoco's brand, logistics, credit card and geographic reach, this company has a potential to be a truly major player, a juggernaut in the years ahead.

Operator, we're now ready for any questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Irene Nattel with RBC Capital Markets.

Irene Nattel - RBC Capital Markets, LLC, Research Division

Thank you for quantifying the impact of the shift in Easter. When you look at the weather impact, is there any way for you to quantify that?

Sam L. J. Susser

Irene, this is Sam. I would say that based on what we're seeing in a more normal weather pattern, that the weather is worth about 250 basis points, the impact of the weather on the quarter.

Irene Nattel - RBC Capital Markets, LLC, Research Division

Okay. That's a big number, Sam.

Sam L. J. Susser

It's a very unusual quarter.

Irene Nattel - RBC Capital Markets, LLC, Research Division

Clearly, clearly. So if we look -- so taking that into consideration, how would you describe the competitive dynamic in your key markets? And was there any real intensification, say, sequentially or quarter-over-quarter?

Sam L. J. Susser

I want to reflect on that number. If I'm off on the 250, maybe it's 200. I shouldn't imply so much precision, but weather is worth a couple of percent. And I would not say that there's been any meaningful change in the intensity of the competition from prior quarters. It is competitive, it is intense. We've got great competitors that we respect, and there's lots of new growth in Texas but not at a different pace than 3 or 4 months ago.

Operator

Next question comes from the line of Bonnie Herzog with Wells Fargo.

Bonnie Herzog - Wells Fargo Securities, LLC, Research Division

I just have a question on your packaged drinks. You called it out as having driven your strong merchandise margin, so I was hoping you could talk about some of the trends you're seeing in packaged beverages, and then how that helps drive your strong margins. And then could you also touch on some of the trends you're seeing in the broad tobacco category, especially in e-cig for E-Vapor?

Sam L. J. Susser

Sure, thank you. Bonnie, the -- from the packaged drinks side, the real trend line is growth in single-serve immediate consumption for us, especially in energy drinks, speciality water is key [ph], which are higher-margin items; and travel, with great frequency inside of Laredo Taco Company basket. So we've had some help there. The take-home multipack business, so 12 packs, remain under a lot of competitive pressure. We're holding our own, but it's a competitive landscape for those larger packages, which are very price-sensitive for most consumers. In this particular quarter, I would also add that our coffee business was really strong. That's not necessarily a good thing. That's kind of another weather report, but we hope to see a much stronger trend in fountain and frozen beverages, hopefully, in the coming quarters with just the average kind of weather pattern. With respect to the e -- the electronic cigarette business and the new packages, still some growth, but it's off a tiny base, very, very, very small base. But we would see it as incremental to the category. But it's so small, it's really hard to measure. We are seeing growth in moist or smokeless. And our trends in the cig -- traditional cigarette category, it's not a growth business for us, but we are growing our market share because our -- there's a decline in that market that's much greater than what we're experiencing. So we're paying a lot of attention to the category, it remains an important traffic driver for us. Cigarette gross profit is 7% of the total inside gross profit, so it's at a place where we think it's very manageable for us.

Bonnie Herzog - Wells Fargo Securities, LLC, Research Division

I just had a quick follow-up on the energy category, because certainly, that's been a trend I've been seeing for a while, and I'm hearing from several retailers that they're allocating more space to energy drinks, possibly taking space away from [indiscernible], which has been under pressure. Is that something you've done in your stores as well?

Sam L. J. Susser

Short answer is yes. It's not an enormous shift, but as we are going through resets, that would be the kind of the trend line, as we're trying to be sure we stay in stock on what customers want now.

Bonnie Herzog - Wells Fargo Securities, LLC, Research Division

And what's growing, and like you said, driving margins, okay.

Operator

Our next question comes from the line of Dane Leone with Macquarie.

Dane Leone - Macquarie Research

So the one question, keeping in mind that there's the [ph] guidance and everything else, we have a lot of questions just about how you've thought about transfers into the MLP assets and the short history that it's existed. Is there any color you can provide in terms of the thought process of the payment or the payment terms, I guess, maybe from Gainesville or any other transactions that you guys were considering where Susser would drop down assets into the MLP?

Sam L. J. Susser

Susser, during these next few months, is going to operate on the basis consistent with what we've done in past practice. We're going to continue to drop down our newly built Stripes stores and just operate on a steady-state basis. So we don't have any significant plans to deviate from what has been our operating plans since going public at Susser Partners.

Dane Leone - Macquarie Research

Yes. I guess the question more specifically was if you look at the Gainesville transaction, right, Susser was issued $2 million in Susser Petroleum common units for the addition of the assets. Is there kind of an ROI target that you were using, or I guess how was that the right number?

Sam L. J. Susser

We used, I think, about $2 million the value of SUSP units, which was part of the overall tax structuring of the transaction. It was a structure that was complicated for a small deal, but it saved us -- a lot of work for the team, but it saved the company some important taxes. There was only $2 million worth of SUSP units. And with respect to returns, that was a business that we expected to acquire at a very attractive, kind of mid, high single-digit EBITDA multiple. And our team's done an outstanding job there and we're ahead of our targets a little bit, with a great outlook for the business.

Operator

Your next question comes from the line of John Lawrence with Stephens.

John R. Lawrence - Stephens Inc., Research Division

Sam, would you start off just a little bit on the expense side? And I guess from a broad standpoint, the experience with the Sac-N-Pac stores from acquisition date and integration date, are you seeing anything different in those markets than you expected or marketplace competitive pressure, anything, just dive into that a little bit, if you will.

Sam L. J. Susser

John, our fuel volumes there are off to a really strong start. We have made such a wholesale change in the merchandise lineup over the last 5 or 6 weeks. We have had challenges getting to in-stock with our suppliers and staying in-stock as we've completed those resets. So it has been a little bit of a bumpy road through the merchandise resets of the Sac-N-Pac stores. We pretty much had them all done by the end of April, and last week's data was very, very positive on the merchandise side now that we've got the products in-stock that our customers are looking for and the feel of the merchandise set is much closer to Stripes. We'll continue to tweak planograms in the vault, vault sets between now and May 30, Sid? We'll have all the vaults done by May 30, so we're feeling very good about the outlook there. And no, there hasn't been a meaningful change in the competitive environment or the labor market. It's a challenging market, but our team has a lot of new tools, and is managing labor much better today than we were just 6 months ago.

Operator

Our next question comes from the line of Sharon Lui with Wells Fargo.

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Just following up, I guess, on John's question about Sac-N-Pac. Since I guess the deal has closed for about a month now, is there, I guess, an update on how you plan to optimize the portfolio, meaning potentially, how many stores could be converted to Stripes and potentially drop down to SUSP?

Rocky B. Dewbre

Sharon, this is Rocky. As Sam mentioned, we've spent the last couple of months resetting the merchandise in all of the Sac-N-Pac stores, and we're going to run those stores for a while to determine exactly what the volumes get to and after that time, make a decision as to whether we would continue to operate them long term under the Stripes brand or do something else. So based on that, really, no change to our original plan. We will evaluate them after running them for a while, and at that time make a decision as to how many we might drop. There's 47 total sites. Some of them are smaller footprint stores that may not make sense for the Stripes brand, but there's many in the package that are much larger that we think will be great, but as far as giving you a precise number, we don't have a laser dot on that at this point.

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Okay, that's helpful. And then I guess, just following up on the improvement in the fuel margins for third party, do you expect that to continue to trend higher given, I guess, higher commercial margins?

Rocky B. Dewbre

We had a fabulous quarter last quarter. As we mentioned in our comments earlier, the Gainesville volume has grown over what we expected and just higher margin in our average commercial gallon. So that's been very positive and will hopefully continue. But separate from that, our other commercial business, we had a great quarter as well. So is that sustainable? I would hope so, but I would be less confident in that. This was a great quarter. As you can recall from the -- each quarter, last 2 or 3 have grown, and I don't know that we can sustain that growth, but we've been...

Sam L. J. Susser

The outlook is great for the Permian Basin, which drives a lot of that activity, as you know, Sharon. But we've come to believe that trees don't grow to the sky even in the great state of Texas. So we try to be realistic too. But there's a good positive trend. Our customers are growing. They need our services and we feel good about it, but we wouldn't extrapolate that forever.

Operator

Our next question comes from the line of Scott Mushkin with Wolfe Research.

Scott Andrew Mushkin - Wolfe Research, LLC

I really just don't have a question. I just really wanted to say thank you. You guys are some of the finest people I know and do an incredible job running that business. And personally, I'm going to miss the earnings conference calls and hope to see everybody resurface and make people a lot more money. Sam, you're a great businessman.

Sam L. J. Susser

Scott, you're kind to say it and thanks for your kind words, and we're going to keep swinging and hopefully keep driving growth here with our new partners.

Operator

Your next question comes from the line of Ben Brownlow with Raymond James.

Benjamin Brownlow - Raymond James & Associates, Inc., Research Division

On the new builds, can you give some color around what the company's capacity is for annual new builds and just comment on how permits and community approvals would limit that acceleration?

Sam L. J. Susser

Ben, we are continuing to plan for 28 to 35-or-so new stores a year. I think with the land bank that we have and the properties under advanced negotiations, I think we -- despite the permitting challenges, we could move towards the high end of that and keep bumping it up over the next couple of years, from a permitting standpoint. We're certainly getting better at the people development side, but we're having to add over 1,000 net new jobs to support our current level of growth, and that's very challenging. So we feel that the people development side and getting the food service culture and the customer service culture right, that pace of growth is also a bit of a challenge. And I think we, in terms of organic growth, we would need to be thinking about stepping that up incrementally as opposed to a giant step change. Of course, all of this is contingent on the continued recovery strength of the economy and population growth in the markets that we serve. And it's very strong right now and we're feeling better about the outlook as more and more of these industrial plants are breaking ground and getting permitted, there's -- the outlook is very bright over the next 3 or 4, 5 years and I think we can keep creeping up new store growth.

Operator

[Operator Instructions] And our next question comes from the line of Ronald Bookbinder with The Benchmark Company.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

I was wondering, have the cigarette margins stabilized?

Sam L. J. Susser

Yes. They have really -- we've seen, gosh, a decline for about 10 years, just a little bit each year. And for us, they've gotten so low, they seem to have stabilized. And I don't see a return to yesteryear. I think it's going to be probably pretty flattish going forward. But we're not feeling the same downward pressure, and that's part of the merchandise margin strength that we were blessed to report here in Q1.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

And you all talked about the fuel volumes at Sac-N-Pac being 60% of the Stripes. But how is their operating margin compared to Stripes?

Sam L. J. Susser

It's -- their contribution is lower because their merchandise and fuel volumes per store basis are much lower than an average Stripes store. But we're very bullish on our ability to grow that and bring it closer to the Stripes norm over time for the stores that we operate. We also are -- picked up some sites for our land bank that are very good, and we look forward to building new sites in that Central Texas region, very fast-growing San Marcos area. And those stores ought to be real winners for us and we'll be able to expand our food service offering in a portion of these stores, which is going to help bump margins. But it's a multi-year project for us, not unlike Town & Country.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

And with the merchandise resets, while it's only been a very short period, has Sac-N-Pac seen a really nice comp kick? And could you talk about that?

Sam L. J. Susser

The data that we have is so short. I mean, we only have really a week's worth of data since the stores were reset. But the trend was up 8 or 10 points pre versus post in that first week. So -- and we have -- so we feel real good about that, but more work to be done. It's so very early, I wouldn't want to extrapolate anything from a week's worth of data.

Ronald Bookbinder - The Benchmark Company, LLC, Research Division

And lastly, on that $0.057 wholesale fuel margin, while it's being driven by the Permian Basin producers, is there higher costs involved, SG&A involved in delivering it to the Permian Basin?

Rocky B. Dewbre

Ronald, this is Rocky. Absolutely, there is. In fact, I think Mary may have called that out. In our operating and G&A expenses at the partnership, you saw a bump, and a lot of that's driven by the operating cost for that business. I think about 70% of the increase in operating expenses were specifically tied to the Gainesville business. So higher margin but higher costs as well. With that said, overall, we've been pleased with the cash flow.

Operator

Mr. Susser, we have no additional questions. Please continue with any closing remarks.

Sam L. J. Susser

Thank you very much. I'm very grateful for the opportunity to continue to serve our unitholders and our team members as Chairman of the Board of SUSP as we move forward post-closing. I also look forward to supporting Bob Owens and hopefully helping drive growth as this new chapter in our company's history develops.

It's been a pleasure to get to know so many of you. I count a number of you as true friends. For a few of you who have been with Susser Holdings since our IPO in October of '06, you've seen an increase in value of nearly five-fold. We are very proud of our record, creating strong value for our shareholders, our unitholders and our bondholders over the years.

I usually end these calls with an invitation to come to Texas, tour our stores and taste our hot fresh delicious tacos. Our doors are always open and Stripes Laredo Taco Company is ready to serve you today and in the future. Operator, thank you very much. This concludes our call.

Operator

Ladies and gentlemen, this concludes the Susser Holdings Susser Petroleum Partners First Quarter Earnings Conference Call. If you'd like to listen to a replay of today's conference call, please refer to the press release. AT&T would like to thank you for your participation. You may now disconnect.

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