SAN ANTONIO -- CST Brands Inc., which Valero Energy Corp. spun off in May 2013, said that it continues to assess its asset base and close convenience stores that are no longer core to its ongoing strategy. As part of this network optimization, it announced on Thursday that it has identified approximately 100 stores that are candidates for sale.
Most of these sites could potentially be added to the company's growing wholesale distribution business in the United States, it said.
It identified the stores based on several criteria, and while many of them may be smaller in square footage and below the company store average from an inside sales and EBITDA perspective, the 100 locations still average more than 3,000 gallons of fuel sold per store per day, which makes them an attractive location for sale and good dealer candidates for its wholesale business.
As reported in a 21st Century Smoke/CSP Daily News Flash, the company said that it has engaged NRC Realty & Capital Advisors, Chicago, to sell these properties and go to market by the middle of April.
New York City-based Wells Fargo Securities LLC c-store analyst Bonnie Herzog wrote in a research note that "a 100-store sale could raise around $80 million to $100 million."
Kim Bowers, chairman and CEO of CST Brands, said during the earnings conference call, "We closed seven locations in the U.S. in the fourth quarter, ending the year with 11 closures overall. The average square footage of these 11 stores was less than 1,800 square feet and they had lower cash flow levels when compared to our remaining store portfolio. Seven of the 11 stores were expiring leased sites and, based on economic reasons, we decided not to renew upon lease expiration."
She said CST brands "met its store targets for 2013 as it opened 22 new stores with plans to build more in 2014. During the fourth quarter, the company opened two new stores in the U.S. and five in Canada. The company currently expects to build 30 new stores in the U.S. and eight new stores in Canada during 2014. These new stores provide more product variety and enhanced offerings such as foodservice.
Bowers added, "Our real estate and construction teams continue to be very busy as we achieved our 2013 goal of building 15 new stores in the U.S. and seven in Canada. And with the opening of three stores and nine stores already under construction this year, we are well on our way to accomplishing our 2014 goal of opening 30 stores in the U.S. and eight in Canada. Our construction team has not only been busy with building new stores, in the U.S. last year, they also remodeled 34 stores, including four raze-and-rebuild sites, and upgraded 16 car wash facilities at existing locations. In Canada, they completed the year with 20 store renovation projects and acquired two dealer locations that were converted to company-operated sites."
Fourth-Quarter, Full-Year Financials
For the three months ended Dec. 31, 2013, the company reported net income of $34 million, compared to net income of $60 million, for the comparable period in 2012. Revenues totaled $3.1 billion for fourth-quarter 2013 compared to $3.2 billion for the same period of 2012.
Motor fuel revenues in the U.S. segment declined $110 million, driven by a 1% decline in motor fuel gallons sold and a 6% decline in the company's per gallon average motor fuel selling price. U.S. motor fuel gross margin (cents per gallon), after deducting credit-card fees, was 15 cents, compared to 21 cents in fourth-quarter 2012. The company experienced historically strong U.S. motor fuel gross margins in fourth-quarter 2012, due primarily to the volatility of wholesale gasoline prices during that period. U.S. merchandise gross margin, net of credit-card fees, increased from 28.9% for fourth-quarter 2012 to 30.5% for the same period in 2013 due primarily to an increase in foodservice and packaged beverages.
Operating income was $60 million for fourth-quarter 2013, compared to $91 million for fourth-quarter 2012. Adjusted EBITDA was $93 million for the quarter, compared to $123 million for the same period in 2012.
Net income for the year ended Dec. 31, 2013 was $139 million. For the same period in 2012, net income was $208 million. Revenues were approximately $12.8 billion, compared to $13.1 billion for 2012.
U.S. motor fuel revenues declined $186 million, driven by a 3% decline in the company's per-gallon average motor fuel selling price.
Operating income was $238 million for 2013, compared to $313 million for 2012. Adjusted EBITDA was $366 million for 2013, compared to $429 million for 2012. The primary reason for the decline in both operating income and adjusted EBITDA was a decrease in motor fuel gross margin in both the company's U.S. and Canada retail segments. The company also had an increase of $13 million of operating expenses related to new store growth along with an increase of $17 million of general and administrative expenses primarily associated with being a new public company.
"As you compare our 2013 results to 2012, keep in mind that we took on additional costs as we established ourselves as an independent, publicly traded company," said Bowers. "The company also launched several new initiatives, built more stores than ever before and began programs to further maximize gross profit capture of the available fuel margin. In 2012, we experienced a historical high fuel volume and margin environment that was not repeated in 2013."
She continued, "Central to our success is our commitment to continue focusing on operational excellence both inside and outside of the store. We will construct more new stores this coming year, expand our signature food offerings and develop new growth opportunities. Soon we will be completing our first year as CST, and we look forward to 2014 and building on our significant 2013 accomplishments."
CST Brands is one of the largest independent retailers of motor fuels and convenience merchandise in North America. Based in San Antonio, Texas, CST employs nearly 12,000 Team Members at approximately 1,900 locations throughout the Southwestern United States and Eastern Canada offering a broad array of convenience merchandise, beverages, snacks and fresh food. In the United States, CST Corner Stores sell Valero fuels and signature products such as Fresh Choices baked and packaged goods, U Force energy and sport drinks, Cibolo Mountain coffee, FC Soda and Flavors2Go fountain drinks. In Canada, CST is the exclusive provider of Ultramar fuel and its Depanneur du Coin and Corner Stores sell signature Transit Cafe coffee and pastries.
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