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Susser Soars With Strong 2012 Results

Same-store merchandise sales up 5.8% in fourth quarter, 6.6% for year

CORPUS CHRISTI, Texas -- Susser Holdings Corp. has reported strong financial and operating results for the fourth quarter and full year ended Dec. 30, 2012, largely on increased merchandise sales and retail fuel volumes.

Same-store merchandise sales increased 5.8% in the fourth quarter, versus growth of 5% in the prior-year period. Average retail gallons sold per store increased 3.1% from a year ago, compared with growth of 7.2% in fourth-quarter 2011. Retail net merchandise margin was 34.1% in the fourth quarter, versus 33.4% a year earlier.

Retail-segment fuel margin before credit-card expense averaged 21.1 cents per gallon, compared with 18.6 cents a gallon in the year-earlier period. The retail fuel margin for the fourth quarter has been reduced by a three-cents-per-gallon gross profit markup charged by Susser Petroleum Partners LP beginning Sept. 25, 2012, following its initial public offering (IPO). The wholesale segment historically made no profit on motor fuel sales to the retail segment, and will now record a gross profit markup on these gallons. Excluding this three-cents-per-gallon charge, the fourth-quarter 2012 retail fuel margin would have been 24.1 cents per gallon, for comparison against the prior-year's 18.6-cent margin and the previous five years' fourth-quarter average margin of 15.4 cents.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $45.5 million in the fourth quarter, up 43.8% from a year ago, reflecting increases in merchandise sales and retail and wholesale motor fuel volumes sold, as well as the increased merchandise and fuel margins. Consolidated gross profit totaled $156.4 million, up 21.3% from a year ago.

Net income attributable to Susser Holdings in fourth-quarter 2012 was $10.6 million, or 49 cents per diluted share, versus $5.3 million, or 29 cents per diluted share in fourth-quarter 2011. Net income attributable to holders of the 49.9% noncontrolling interest in Susser Petroleum Partners totaled $4.3 million in the fourth quarter.

Consolidated revenues for the fourth quarter totaled $1.4 billion, an increase of 7.8% year-over-year. This increase was driven by an 8.6% increase in retail fuel revenues, a 4.6% increase in wholesale fuel revenues sold to third parties and a 10% increase in merchandise sales. The higher fuel revenues were driven by increases in both retail and wholesale volumes sold and by higher selling prices for retail motor fuel.

"We achieved outstanding performance both for the fourth-quarter and the full-year 2012, with a record number of new Stripes convenience store openings, solid year-over-year growth in same-store merchandise sales and increased retail and wholesale motor fuel volumes," said Sam L. Susser, president and CEO. "Fiscal 2012 was the 24th consecutive year of positive same-store sales growth."

He added, "Susser Petroleum Partners (SUSP), which now operates the majority of our wholesale fuel distribution business, completed its IPO in late September 2012. SUSP delivered a strong fourth quarter both in terms of gallons sold and cents-per-gallon margin. As the owner of SUSP's general partner and majority owner of SUSP's limited partner interests, Susser Holdings continues to benefit from the strong financial performance of the wholesale fuel business."

Susser Holdings opened 10 new large-format Stripes convenience stores during the fourth quarter--a new quarterly record--for a total of 25 new stores opened in 2012. It closed or converted to dealer operations three smaller retail stores during the fourth quarter, bringing the number of retail stores in operation at yearend to 559. It has opened one store to date in 2013 and closed one; 11 retail stores are currently under construction. The company expects to build 29 to 35 Stripes stores this year and continues to acquire additional land for future store development.

The wholesale segment added 13 new wholesale dealer and consignment sites during the latest quarter and discontinued six for a total of 579 contracted wholesale sites as of Dec. 30. The company expects to add 25 to 40 new wholesale branded dealers and consignment sites this year.

  • Merchandise. Merchandise sales totaled $240.8 million in the fourth quarter, up $21.8 million, or 10% from a year earlier. Approximately $12.5 million of the increase came from stores that have been operating a year or longer, with the balance from stores that were opened during the last four quarters. Same-store merchandise sales increased 5.8%, compared with growth of 5% a year ago. Sales of packaged drinks, beer, foodservice, cigarettes and snacks drove most of the sales growth.Net merchandise margin as a percentage of sales was 34.1%, compared with 33.4% in the fourth quarter of 2011. Merchandise gross profit was $82.2 million, up 12.4% from a year ago.Same-store dollar increases in packaged drinks and foodservice primarily led gross profit growth.
  • Retail Fuel. Retail fuel volumes increased 5.6% compared with a year ago to 211.3 million gallons. Average gallons sold per store per week increased 3.1% year-over-year to approximately 29,800 gallons, following a 7.2% year-over-year increase in fourth-quarter 2011. Retail fuel revenues totaled $718.1 million, up 8.6% versus the prior-year period, reflecting the increased gallons sold, along with a 10-cent-per-gallon increase in the average selling price of motor fuel year-over-year.Retail fuel gross margin averaged 21.1 cents per gallon, compared with 18.6 cents per gallon a year ago. (The fourth-quarter 2012 retail fuel margin is reduced by the three-cents-per-gallon gross profit margin to SUSP that was not deducted from the prior year's fuel margin.) After deducting credit-card expense, the net fuel margin was 15.6 cents per gallon, versus a net 13.3 cents per gallon in fourth-quarter 2011. Retail fuel gross profit increased 20% from a year ago to $44.6 million, due to the strong increase in margin per gallon and the higher volumes sold.
  • Wholesale Fuel. Susser's wholesale segment includes all of SUSP operations as well as the consignment sales and transportation business that was not contributed to SUSP. Wholesale fuel volumes to third parties (all gallons except those distributed to Susser's retail stores) increased 4.3% from a year ago to 149.9 million gallons. Wholesale fuel revenues increased 4.6% from the prior-year quarter to $422 million. This revenue increase reflects the increase in volumes sold, as the selling price was flat year-over-year at $2.81 per gallon.Wholesale fuel gross margin from third parties was 6.3 cents per gallon, compared with 5.1 cents in the fourth quarter of last year. Wholesale fuel gross profit increased by $8.4 million from a year ago to $15.8 million; $6.4 million of this increase reflects the gross profit markup charged to the retail segment effective September 25, 2012.

For full-year 2012, revenues totaled $5.8 billion, up 12% versus 2011, driven by increases in retail and wholesale fuel revenues and in merchandise sales. For the 12 months ended Dec. 30, 2012, Susser's same-store merchandise sales grew 6.6%. Merchandise sales totaled $976.5 million, up 10.7% from 2011. Merchandise margin was 33.9%, versus 33.7% in fiscal 2011.

Fiscal 2012 retail fuel margin--after deducting the three-cents-per-gallon gross profit markup paid to SUSP that began Sept. 25--was 21.8 cents per gallon, compared with 23.2 cents in 2011. Excluding the partial-year impact of the SUSP gross profit markup for comparison purposes, retail fuel margin was 22.6 cents per gallon. After deducting credit-card expense, net fuel margin was 16.3 cents per gallon in 2012, (or 17.0 cents before deducting the three-cents-per-gallon gross profit markup paid to SUSP) compared with 17.7 cents per gallon in 2011. Wholesale fuel margin from third parties was 6.2 cents per gallon, up from 5.9 cents per gallon in 2011.

Adjusted EBITDA for 2012 was $182.9 million, up 9.5% from 2011. Gross profit was $611.4 million, up 9.8% from fiscal 2011, reflecting higher volumes in both motor fuel and merchandise. Net income attributable to Susser Holdings was $46.7 million, or $2.19 per diluted share, versus $47.5 million, or $2.68 per diluted share for the prior year. Net income attributable to Susser Holdings for 2012 was reduced by a noncash deferred income tax charge of $3.6 million (17 cents per diluted share) recorded during the third quarter, solely related to Susser Holdings' contribution of net assets to SUSP in connection with SUSP's IPO.

Susser Holdings is a third-generation, family-led business based in Corpus Christi, Texas, that operates more than 555 c-stores in Texas, New Mexico and Oklahoma under the Stripes banner. Restaurant service is available in more than 350 of its stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings also is majority owner and owns the general partner of Houston-based Susser Petroleum Partners LP, a publicly traded partnership formed by Susser Holdings to engage in the primarily fee-based wholesale distribution of motor fuels to Susser Holdings and third parties. Susser Petroleum Partners distributes more than1.4 billion gallons of motor fuel annually from major oil companies and independent refiners to Susser Holdings' Stripes c-stores, independently operated consignment locations, c-stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.

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