CORPUS CHRISTI, Texas -- Susser Holdings Corp., in an update on its acquisition of Town & Country Food Stores, said it now expects total administrative expense and procurement savings resulting from the Town & Country integration to be about $5 million annually, compared to the $2 million it had announced. Also, the company's merger and integration committee has completed an analysis of the Town & Country management and backoffice systems and has implemented plans to reorganize the retail division management team.
"At the end of this process, Town & Country CEO Alvin New [image-nocss] notified us that although he remains committed to ensuring the successful integration of the two businesses, he is unable to make the commitment to relocate his family from San Angelo to the Corpus Christi area this summer, so the company has begun a search to recruit a strong and experienced executive to lead our retail division," said Sam L. Susser, president and CEO. "Alvin has indicated he will continue in his current role until his successor can be identified."
New was the expected to become executive vice president of Susser Holdings and president and CEO of retail operations, succeeding the departing Roger Smith, executive vice president of Susser Holdings and COO of retail operations.
The $3 million positive change to the company's fourth-quarter 2007 operating performance reflects expected savings from reductions in corporate staffing, reductions in duplicative overhead expenses and improved supplier/vendor terms that have recently been negotiated for the combined entity.
"While there is still work to do, we have made significant progress in integrating the two companies," Susser said. "We have identified new opportunities and are more confident than ever in our ability to realize benefits from our increased scale and geographic diversity. As of the first of January, we have successfully incorporated Town & Country's results of operations into Susser's financial reporting system, which will allow us to provide good visibility into the combined company's results for the first quarter of 2008," he said.
During the fourth quarter, Susser completed negotiations and entered into a new three-year supply agreement with Temple, Texas-based McLane Co., the primary grocery and merchandise supplier to both Susser and Town & Country, which provides for a new delivery fee-based pricing structure under which the company expects to achieve significant cost savings.
The company has reached additional agreements with its major beverage suppliers, along with various other smaller suppliers and service providers, that are expected to account for a portion of the annual cost savings. There may be further cost savings opportunities as other contracts mature, Susser said.
To implement the Town & Country management reorganization, Susser has offered certain individuals the option to accept relocation opportunities, and numerous duplicative corporate positions will be eliminated.
Several major steps toward consolidating the backoffice systems have been completed, and the company said it expects to complete this process and the associated relocations by September 2008. Substantially all of the 1,800 Town & Country retail operations employees in Texas and New Mexico remain in their current positions.
"The work of our merger and integration committee has been thorough, prompt and professional," Susser said. "There were a number of difficult decisions that had to be made, and we are comfortable that we have taken the right steps to ensure the long-term success of the company."
The anticipated cost savings from the merger is only one of many factors that may impact the company's future results, it said. Notably, Town & Country fuel margins during fiscal 2007 were several cents higher than historical averages, and any anticipated cost synergies could be offset by lower fuel margins or by the impact of other operating factors in future periods.
Susser said it expects to report same-store merchandise sales growth for fourth-quarter 2007 of about 11.7%. For the full fiscal year 2007, same-store merchandise sales are expected to grow by approximately 7.7%. For the fourth quarter, retail average per-store fuel volumes are expected to increase by 9.3%. This would translate into full-year average per-store fuel volume growth of 5%. The company's same-store merchandise sales growth and average per-store fuel volume results do not reflect the contribution of the 168 Town & Country stores acquired on Nov. 13, 2007.
During the fourth quarter, the company opened nine new retail units, bringing the total number of new and acquired stores in 2007 to 186, including the 168 acquired Town & Country stores. Also during the quarter, it closed three retail locations, bringing the total retail store count to 505 as of Dec. 31, 2007. One additional store has been opened since year-end.
Susser Petroleum Co., the company's wholesale fuel business, opened 13 new dealer locations and closed two during the fourth quarter, bringing the total dealer network count to 388 at year-end. The company said it expects to report wholesale volume growth of 4.5% for the fourth quarter and 3% for the full year. Full-year results reflect the impact of selling 25 unattended fueling sites in mid-2006, it added.
Corpus Christi, Texas-based Susser Holdings is a third-generation family-led business that operates 506 convenience stores in Texas, New Mexico and Oklahoma under the Stripes, Town & Country and Village Market banners. Restaurant service is available in more than 280 of its stores, primarily under the proprietary Laredo Taco Co. and Country Cookin' brands. It also supplies branded motor fuel to 388 independent dealers through its wholesale fuel division.
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