Susser Reports Operating Results

“We delivered one of our strongest quarters ever in same-store merchandise sales growth during the latest quarter, and despite higher gasoline prices versus a year ago, we achieved strong growth in gallons sold,” says Susser CEO.

Susser Holdings Corp. has reported strong financial and operating results for the third quarter ended Oct. 2, 2011, driven by robust performance in both merchandise and fuel.

Same-store merchandise sales increased by 7.4%, compared with an increase of 3.4% in the third quarter of 2010. Average retail gallons per store per week increased 5.6% year-over-year, versus growth of 3.9% a year ago.

Retail net merchandise margin was 33.6% in the latest quarter, versus 33.8% in the same quarter last year. Retail fuel margins before credit card expense averaged 27.7 cents per gallon, versus 22.8 cents a year ago and 31.2 cents a gallon in the second quarter of this year.

Adjusted EBITDA rose 37.9% from the third quarter of last year to $51.4 million. Third quarter 2011 gross profit was $153.4 million, which was up 18.6% year-over-year.

Net income for the quarter more than doubled to $18.5 million, or $1.06 per diluted share, versus $9.0 million, or $0.52 per diluted share, in the same quarter last year.

Consolidated revenues for the latest quarter totaled $1.4 billion – which was flat versus the second quarter of 2011 but up 40.1% from a year ago. The year-over-year increase is the result of a 47.9% increase in combined retail and wholesale fuel revenues, driven by a 7.3% increase in total gallons sold and a 37.9% increase in the average selling price per gallon, along with a 12.8% increase in overall merchandise sales.

“We delivered one of our strongest quarters ever in same-store merchandise sales growth during the latest quarter, and despite higher gasoline prices versus a year ago, we achieved strong growth in gallons sold,” said Sam Susser, president and CEO. “Our net merchandise margin was slightly lower than a year ago, which reflects small and very manageable increases in certain commodity costs, along with the impact of selective promotions that have enabled us to maintain and grow market share and drive customer traffic.

He added that the company expects to continue to benefit from its geographic market focus in Texas, which is still faring better than many other parts of the U.S. due to the relatively stable housing market, continued strong population growth and robust job growth.

“As 2011 draws near to a close, we expect to deliver our 23rd consecutive annual increase in same-store merchandise sales. As a result of our continued strong performance this past quarter, we have raised 2011 guidance for most of our key performance metrics and have accelerated our growth capital spending,” he said.

C-store Openings
Susser opened five large-format Stripes convenience stores and closed two smaller stores during the third quarter of 2011, for a total of 535 retail stores in operation as of Oct. 2.

Two others have opened to date in the fourth quarter, bringing total new Stripes stores added year-to-date to 15. Five additional stores currently are under construction, and most are expected to open before the end of this year. The company expects to commence construction on four to six additional retail locations prior to year end and continues to invest in its land bank.

In its wholesale fuel business, Susser added two new dealer sites and discontinued supplying one site during the third quarter, for a total of 440 dealer locations as of Oct. 2. Following the close of the third quarter, on Oct. 3, the company completed the acquisition of 121 branded wholesale fuel supply contracts and 24 commercial accounts in North and East Texas, bringing our current contracted branded dealer count to 561.

Financing
Sussser completed a sale/leaseback transaction for one retail store in the third quarter for proceeds of $2.8 million. One additional transaction for $2.6 million has also been completed in the fourth quarter. Susser ended the third quarter with trailing 12-month Adjusted EBITDA of $159.5 million. The ratio of net debt to Adjusted EBITDA improved by an additional 30 basis points versus the prior quarter, to 2.3 times. Net debt at Oct. 2 totaled $373.5 million, based on total debt of $451.0 million, less cash of $77.5 million. The Company spent $4.4 million during the quarter to repurchase 229,102 shares of Susser common stock at an average price of $19.12 per share. Through Nov. 8, the company has spent $9.0 million of a total $15 million stock buyback authorization announced in June 2011.

Through the first nine months of the year, the company has invested $95.7 million in gross capital expenditures and $86.3 million in net capital expenditures.

Merchandise – Total merchandise sales increased by 12.8% from a year ago to $233.5 million in the latest quarter. Approximately $15 million of the increase was realized from stores that have been in operation for 12 months or more, with the balance attributable to new stores added over the last four quarters. Same-store merchandise sales increased 7.4%, compared with a 3.4% increase in the third quarter of 2010. Packaged drinks, food service, beer, snacks and cigarettes led the company’s strong third-quarter merchandise sales performance.

Net merchandise margin was 33.6%, versus 33.8% a year ago, which reflects slightly higher commodity costs and selected in-store promotions that resulted in increased market share in several core categories. Merchandise gross profit increased by 11.9 percent versus a year ago to $78.4 million.

Retail Fuel – Retail fuel volumes increased 7.9% from a year ago to 199.7 million gallons for the third quarter. Average gallons sold per store per week were 5.6% higher than the comparable quarter of last year, at 29,027 gallons. Revenues from retail fuel sales totaled $711.2 million – an increase of 45.4% year-over-year – which is due to a 92-cent-per-gallon increase in average pump prices, plus the impact of higher gallons sold.

Retail fuel gross margin averaged 27.7 cents per gallon in the third quarter, compared with 22.8 cents per gallon a year ago. After deducting credit card expense, net fuel margin was 21.9 cents per gallon for the third quarter, compared with 18.5 cents per gallon a year ago. Retail fuel gross profit increased 31.3% year-over-year to $55.3 million.

Wholesale Fuel – Wholesale fuel volumes sold to approximately 440 contracted dealers and other third party customers during the third quarter increased 6.4% from a year ago to 130.0 million gallons. Wholesale fuel revenues were 52.7% higher than a year ago, at $397.2 million, which reflects a 93- cent-per-gallon increase in average wholesale selling prices as well as the increase in volumes sold.

Wholesale gross margin was 6.5 cents per gallon, versus 5.9 cents per gallon in the third quarter of last year. Wholesale fuel gross profit increased by 16% to $8.4 million.

Year-to-Date 2011 Financial and Operating Highlights
For the nine months ended Oct. 2, 2011, Susser reported same-store merchandise sales grew 6.3%. Total revenues for the latest nine-month period were $3.9 billion, up 33.4% versus the first nine months of 2010. Merchandise sales totaled $662.9 million year-to-date, up 9.3% versus the comparable period last year. Merchandise margin was 33.9%, versus 33.5% for the first nine months of 2010.

Retail fuel margin was 24.8 cents per gallon, compared with 19.6 cents for the first three quarters of last year. After deducting credit card expense, net fuel margin was 19.2 cents per gallon year-to-date 2011, compared with 15.3 cents per gallon for the same period a year ago. Wholesale fuel margin was 6.2 cents per gallon for the first nine months of 2011, compared with 5.3 cents per gallon the prior year.

Adjusted EBITDA totaled $135.4 million, up 41.2% from the comparable 2010 period.

Gross profit was $428.1 million, an increase of 18.6% over last year, reflecting improved margins in both fuel and merchandise.

Net income for the first three quarters of 2011 was $42.2 million, or $2.42 per diluted share, versus reported net income of $2.1 million, or $0.12 per diluted share, in the first three quarters of last year.

Excluding a charge for early retirement of debt in May 2010, the company would have reported net income of $17.8 million, or $1.04 per share for the first three quarters of 2010.

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