Susser Holdings Reports Third Quarter 2010 Results

CORPUS CHRISTI, Texas, Nov. 9, 2010 /PRNewswire-FirstCall/ -- Susser Holdings Corporation (Nasdaq: SUSS) today reported that same-store merchandise sales for the third quarter of 2010 increased by 3.4 percent, compared with growth of 3.1 percent in the second quarter of this year and 4.0 percent in the third quarter a year ago.  Retail merchandise margin for the three months ended October 3 was 33.8 percent, versus 33.9 percent in the prior quarter and 33.0 percent in the third quarter of 2009.  Retail fuel margins for the quarter were 22.8 cents per gallon, versus 24.8 cents in the second quarter and 19.7 cents in the third quarter of 2009.

Adjusted EBITDA(1) in the third quarter totaled $37.2 million, compared with $33.1 million a year ago, an increase of 12.5 percent, which reflects higher margins and sales volumes for both fuel and merchandise. Companywide gross profit totaled $129.4 million, up 8.0 percent.  Total revenues increased 9.6 percent versus the third quarter of last year to $966.4 million, which reflects a 12.1 percent increase in combined retail and wholesale fuel revenues and a 2.9 percent increase in merchandise sales.  

Net earnings totaled $9.0 million, or $0.52 cents per diluted share in the latest quarter, compared with net income of $6.5 million, or $0.38 cents per diluted share a year ago.  

“We continued to see steady year-over-year growth in both merchandise and fuel volumes in the third quarter, and stronger margins across our retail and wholesale divisions drove improvements in gross profit and Adjusted EBITDA,” said Sam L. Susser, President and Chief Executive Officer.

“Strength in the energy sector continues to contribute to our same store sales growth.  Retail fuel margins were above our five-year average for the third quarter, and increased sales of diesel fuel suggests that overall commercial activity in our market areas is continuing its recovery.

“Although most of our markets are stable or slowly recovering, our customers remain very value conscious, particularly in South Texas.  We remain focused on competitive pricing and on expense control, even as we deliver the same level of quality and delicious food that Stripes and Laredo Taco Company customers have come to expect.

“We continue to selectively make acquisitions, and are very pleased with the most recent expansion of our wholesale dealer supply network.  We added 39 dealer sites to which we are now supplying motor fuel, and also acquired a big box convenience store in Houston.  The majority of these locations are branded with either the Chevron, Texaco or Mobil flags.”  

The acquisition was closed on October 11 and funded with cash.  The terms were not disclosed, as the transaction value was not material.

New Convenience Store/Wholesale Dealer Site Update

The Company opened four new large format retail stores during the third quarter, including the one acquired, bringing the total number in operation as of October 3 to 525.  Three additional stores have already been opened in the fourth quarter, and one smaller store was closed.  Five more stores are currently under construction, four of which are expected to open by the end of 2010.

In its wholesale operations, Susser added three new dealer sites and discontinued seven during the third quarter.   The October acquisition brings the total number of branded wholesale dealer sites supplied to 422.

Third Quarter Financial and Operating Highlights

Merchandise – Same-store merchandise sales increased by 3.4 percent during the third quarter, compared with an increase of 4.0 percent in the third quarter of 2009.  Same-store sales figures exclude the seven Village Market grocery stores divested in May 2010.  Merchandise gross profit, after deducting shortages, totaled $70.0 million, an increase of 5.6 percent versus the third quarter of last year.  Net merchandise margin was 33.8 percent, versus 33.0 percent a year ago.  Total Company merchandise sales were $207.0 million, up 2.9 percent versus the third quarter of last year.  Average merchandise sales per store per week were approximately $30,500, compared to $29,800 in the third quarter of 2009.

Retail Fuel – Retail store fuel volumes increased 5.6 percent from a year ago to 185.1 million gallons in the third quarter of 2010.  Average gallons sold per store per week increased by 3.9 percent to approximately 27,500.  Retail fuel revenues totaled $489.1 million, an increase of 14.4 percent, as a result of a 20-cent-a-gallon increase in motor fuel prices at the pump and the 5.6 percent increase in volumes sold.  Retail fuel gross margins in the latest quarter were 22.8 cents per gallon, or 18.5 cents after deducting credit card expense, compared with 19.7 cents per gallon a year ago, or 15.8 cents after deducting credit card expense.  Retail fuel gross profit was $42.1 million, up 21.7 percent from the third quarter of 2009.

Wholesale Fuel – Wholesale fuel volumes sold to dealers and other third-party customers during the latest quarter declined 2.5 percent from a year ago to 122.1 million gallons. Wholesale fuel revenues increased 8.0 percent to $260.1 million as a result of a 21-cent-per-gallon increase in the average selling price of fuel. Wholesale gross margin per gallon was 5.9 cents, compared with 5.1 cents per gallon a year ago.  Wholesale fuel gross profit grew by 13.5 percent to $7.2 million.

Year-to-Date Financial and Operating Highlights

For the nine months ended October 3, 2010, Susser reported same-store merchandise sales growth of 3.0 percent, with total merchandise sales of $606.3 million, up 4.0 percent versus the comparable period last year. Merchandise margin was unchanged from a year ago at 33.5 percent. Adjusted EBITDA(1) totaled $95.9 million, up 24.1 percent. Gross profit increased 11.1 percent to $360.9 million, reflecting improved margins in all of the Company’s business segments. Total revenues for the nine months were $2.9 billion, up 22.5 percent versus the year-earlier period.

On a reported basis Susser had net income of $2.1 million, or $0.12 per diluted share, through the first three quarters, versus net income of $7.7 million, or $0.45 per diluted share for the comparable period in 2009.  Excluding a charge for early retirement of debt in the second quarter of 2010, the Company would have reported net income of $17.8 million, or $1.04 a share for the first nine months of 2010.   The Company is on track to exceed its internal goals for 2010 and has therefore recorded $5.0 million in bonus and 401(k)/profit sharing in excess of the amount recorded during the first nine months of 2009.  $1.3 million of this increase is recorded in personnel expense and $3.7 million is recorded in general and administrative expense.

The Company ended the quarter with trailing 12 months Adjusted EBITDA(1) of $110.8 million and net debt (total debt less unrestricted cash) of $372.8 million.  The Company’s ratio of net debt to Adjusted EBITDA(1) was 3.4 times at the end of the third quarter.

(Please note that fourth quarter 2010 results will include results of 13 weeks of operations, whereas the fourth quarter of 2009 included results of operations for 14 weeks.)

2010 Guidance

The Company has revised its guidance for 2010 as follows:  

Third Quarter Earnings Conference Call

Susser’s management team will hold a conference call today at 11 a.m. ET (10 a.m. CT) to discuss third quarter results. To participate in the call, dial 480-629-9643 at least 10 minutes early and ask for the Susser conference call. The call will also be accessible via Susser’s Web site at www.susser.com. To listen live, please visit the Investor Relations page of Susser’s Web site at least 10 minutes early to register.  A telephonic replay will be available through November 16 by calling 303-590-3030 and using the pass code 4377897#.  An archive will be available for 60 days on Susser’s web site.

Corpus Christi, Texas-based Susser Holdings Corporation is a third-generation family led business that operates more than 525 convenience stores in Texas, New Mexico and Oklahoma primarily under the Stripes banner. Restaurant service is available in 310 of its stores, primarily under the proprietary Laredo Taco Company brand. The Company also supplies branded motor fuel to over 420 independent dealers through its wholesale fuel division.

Forward-Looking Statements

This news release contains "forward-looking statements" describing Susser's objectives, targets, plans, strategies, costs, anticipated capital expenditures, expansion of our food service offerings, potential acquisitions and new store openings and dealer locations. These statements are based on current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially, including but not limited to: competition from convenience stores, gasoline stations, other non-traditional retailers and other wholesale fuel distributors; changes in economic conditions; volatility in energy prices; political conditions in key crude oil producing regions; wholesale cost increases of tobacco products; adverse publicity concerning food quality, food safety or other health concerns related to our restaurant facilities; consumer or other litigation; consumer behavior, travel and tourism trends; devaluation of the Mexican peso or restrictions on access of Mexican citizens to the U.S.; unfavorable weather conditions; changes in state and federal regulations; dependence on one principal supplier for merchandise, two principal suppliers for motor fuel and one principal provider for third-party transportation of our motor fuel; financial leverage and debt covenants; changes in debt ratings; inability to identify, acquire and integrate new stores; dependence on senior management; acts of war and terrorism; and other unforeseen factors. For a full discussion of these and other risks and uncertainties, refer to the "Risk Factors" section of the Company's annual report on Form 10-K for the year ended January 3, 2010, and in subsequent quarterly 10-Qs. These forward-looking statements are based on and include our estimates as of the date hereof. Subsequent events and market developments could cause our estimates to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if new information becomes available, except as may be required by applicable law.

Key Operating Metrics

The following table sets forth, for the periods indicated, information concerning key measures we rely on to gauge our operating performance:

Reconciliations of Non-GAAP Measures to GAAP Measures

We define EBITDA as net income attributable to Susser Holdings Corporation before net interest expense, income taxes and depreciation, amortization and accretion.  Adjusted EBITDA further adjusts EBITDA by excluding non-cash stock-based compensation expense and certain other operating expenses that are reflected in our net income that we do not believe are indicative of our ongoing core operations, such as significant non-recurring transaction expenses and the gain or loss on disposal of assets and impairment charges.  Adjusted EBITDAR adds back rent to Adjusted EBITDA.  In addition, those expenses that we have excluded from our presentation of Adjusted EBITDA and Adjusted EBITDAR are also excluded in measuring our covenants under our revolving credit facility and the indenture governing our senior notes.

We believe that Adjusted EBITDA and Adjusted EBITDAR are useful to investors in evaluating our operating performance because:

• they are used as a performance and liquidity measure under our existing revolving credit facility and the indenture governing our existing notes, including for purposes of determining whether they have satisfied certain financial performance maintenance covenants and our ability to borrow additional indebtedness and pay dividends to us;

• they facilitate management's ability to measure the operating performance of our business on a consistent basis by excluding the impact of items not directly resulting from our retail convenience stores and wholesale motor fuel distribution operations;

• they are used by our management for internal planning purposes, including aspects of our consolidated operating budget, capital expenditures, as well as for segment and individual site operating targets; and

• they are used by our Board and management for determining certain management compensation targets and thresholds.

EBITDA, Adjusted EBITDA and Adjusted EBITDAR are not recognized terms under GAAP and do not purport to be alternatives to net income as measures of operating performance or to cash flows from operating activities as a measure of liquidity.  EBITDA, Adjusted EBITDA and Adjusted EBITDAR have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.  Some of these limitations include:

• they do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

• they do not reflect changes in, or cash requirements for, working capital;

• they do not reflect significant interest expense, or the cash requirements necessary to service interest or principal payments on our existing revolving credit facility or existing notes;

• they do not reflect payments made or future requirements for income taxes;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA and Adjusted EBITDAR do not reflect cash requirements for such replacements; and

• because not all companies use identical calculations, our presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR may not be comparable to similarly titled measures of other companies.

The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:

The following table presents a reconciliation of net cash provided by operating activities to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:

SUSS-IR

SOURCE Susser Holdings Corporation

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