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Store Traffic, Improving Economy Helps Improve Susser's 2Q Results

"Well positioned to ramp up new store construction" for 2012, 2013, company says

CORPUS CHRISTI, Texas -- Susser Holdings Corp. has reported record financial and operating results for the second quarter ended July 3, 2011. "We achieved record results in the second quarter in total revenues, EBITDA and net earnings, as well as in merchandise revenues and gross profit and in retail fuel gallons sold and fuel gross profit," said Sam L. Susser, president and CEO. "These strong results were driven in large part by contributions from our new stores, as well as continued strong same-store performance from our merchandise and foodservice offerings and higher margins [image-nocss] in our fuel business."

He said, "Traffic in our stores remains brisk and continues to benefit from population growth and an improving economy in most markets as well as from the completion of our store refurbishing and rebranding from Town & Country to Stripes and Laredo Taco Co. In addition, our 14 new retail stores opened in 2010 and the eight stores opened in the first half of 2011 are helping drive strong organic growth. Through careful cost management and a marketing mix that emphasizes higher-profit-margin beverages, foodservice and other items, we are successfully driving merchandise sales growth and profit margins quarter after quarter."

Susser added, "As a result of our continued strong performance, we are again raising our guidance for 2011 for many of our performance metrics, including same-store sales and fuel margins. In addition, our financial liquidity has never been better, and with the increased investment in our land bank, we are well positioned to ramp up our new store construction program for 2012 and into 2013."

Same-store merchandise sales increased by 5.8%, compared with an increase of 3.1% in the second quarter of 2010. Retail net merchandise margin was 34.0%, up from 33.9% in the same quarter last year. Average retail gallons per store per week increased 3.6% year-over-year. Retail fuel margins increased to 31.2 cents per gallon, versus 24.8 cents a year ago.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 36.1% from the second quarter of last year to $60.9 million. Gross profit was $158.9 million, which was up 18.7% from second-quarter 2010.

Revenues totaled $1.4 billion--a 35.1% increase from a year ago--which is the result of a 42.3% increase in combined fuel revenues and an 8.7% increase in overall merchandise sales.

Net earnings were $23.7 million, or $1.36 per diluted share in the latest quarter, versus a net loss of $1.9 million, or a loss of 11 cents per diluted share, in the same quarter last year.

Susser opened six large-format Stripes convenience stores and closed one smaller store during the second quarter, for a total number of retail stores in operation at July 3 of 532. Three additional stores have been opened so far in the third quarter, for a total of 11 year-to-date, and one store was recently closed, bringing the current retail store count to 534. Six more are currently under construction.

In its wholesale fuel business, Susser added eight new dealer sites and discontinued supplying one site, for a total of 439 dealer locations at the end of the second quarter.

The company generated total proceeds of $6.2 million from c-store sale-leaseback transactions during the second quarter, in addition to a $20 million long-term mortgage facility completed in early May with a regional bank.

Susser ended second-quarter 2011 with trailing 12 months Adjusted EBITDA of $145.4 million and net debt (total debt of $451.2 million less cash of $66.4 million) of $384.8 million, which resulted in a ratio of net debt to adjusted EBITDA of 2.6 times.

Year-to-date, the company has invested $62.1 million in net capital expenditures.

Merchandise. Total merchandise sales increased by 8.7% from a year ago to $226.4 million in the latest quarter, with new stores added during 2010 and 2011 contributing an incremental $10.9 million in merchandise sales. Same-store merchandise sales increased 5.8%, compared with a 3.1% increase in same-store sales in second-quarter 2010.

Net merchandise margin was 34%, versus 33.9% a year ago. The margin increase was led by contribution from packaged drinks, food service, beer and cigarettes. Merchandise gross profit increased by 9.1% versus a year ago to $77.1 million.

Retail Fuel. Retail fuel volumes increased 5% from a year ago to 194.5 million gallons for the second quarter. Average gallons sold per store per week were 3.6% higher than the second quarter of last year, at 28,600 gallons. Revenues from retail fuel sales totaled $725 million--an increase of 41.7% year-over-year--which is due to a 97-cent-per-gallon increase in average pump prices, plus the impact of higher gallons sold. Retail fuel gross margin averaged 31.2 cents per gallon in the second quarter compared to 24.8 cents a gallon a year ago. After deducting credit card expense, net fuel margin was 25.3 cents per gallon for the second quarter compared to 20.2 cents per gallon a year ago. Retail fuel gross profit was up 32.4% year-over-year to $60.7 million.

Wholesale Fuel. Wholesale fuel volumes sold to Susser's approximately 440 dealers and other third-party customers declined 0.6% from a year ago to 128.1 million gallons. Wholesale fuel revenues were up 43.3% from a year ago to $412.1 million, which reflects a 99-cent-per-gallon increase in average selling prices. Wholesale gross margin was 7.0 cents per gallon, versus 5.8 cents per gallon in the second quarter of last year. Wholesale fuel gross profit increased by 20.3% to $9 million.

For the six months ended July 3, 2011, Susser reported same-store merchandise sales growth of 5.7%. Merchandise sales totaled $429.5 million, up 7.5% versus the comparable period last year. Merchandise margin was 34%, versus 33.3% for the first half of 2010.

Retail fuel margins were 23.3 cents per gallon for the first half of 2011, compared to 18.0 cents a year ago. After deducting credit card expense, net fuel margin was 17.9 cents per gallon for the first half of 2011 compared to 13.7 cents a year ago.

Wholesale fuel margin was 6.1 cents per gallon for the first half of 2011 compared to 5.0 cents per gallon the prior year. Adjusted EBITDA totaled $84 million, up 43.3%. Gross profit was $274.6 million, an increase of 18.6%, reflecting improved margins in both fuel and merchandise. Total revenues were $2.5 billion, up 30.1% versus the first half of 2010.

Net income for the first half of 2011 was $23.6 million, or $1.36 per diluted share, versus a net loss of $6.9 million, or a loss of 41 cents per diluted share, in the first half of last year.

Corpus Christi, Texas-based Susser Holdings is a third-generation, family-led business that operates more than 530 Stripes c-stores in Texas, New Mexico and Oklahoma. Restaurant service is available in more than 320 of its stores, primarily under the proprietary Laredo Taco Co. brand. The company also supplies branded motor fuel to more than 435 independent dealers through its wholesale fuel division.

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