Susser Holdings Reports First Quarter 2010 Results

CORPUS CHRISTI, Texas, May 11 /PRNewswire-FirstCall/ -- Susser Holdings Corporation (Nasdaq: SUSS) today reported that same-store merchandise sales for the first quarter of 2010 increased by 2.5 percent, compared with a 1.2 percent decline for the fourth quarter of 2009 and growth of 6.0 percent during the first quarter of 2009. Retail merchandise margin was flat versus the fourth quarter at 32.7 percent, and down from 34.3 percent for the first quarter of 2009.

Adjusted EBITDA(1) for the three months ended April 4 totaled $13.9 million, compared with $19.3 million a year ago, which primarily reflects the impact of lower retail fuel margins and higher credit card fees. Companywide gross profit was slightly up year-over-year at $97.6 million.  Total revenues increased 37.8 percent from a year ago to $938.1 million, reflecting the significantly higher price of fuel, along with a 5.0 percent increase in total merchandise sales.

The Company had a net loss of $5.0 million, or $0.29 per diluted share, versus a net loss of $931,000 or $0.05 per diluted share, for the first quarter of last year.  

“After a very challenging fourth quarter, it appears we have turned the corner, based on the steady rebound we’ve seen in merchandise sales and margins as the first quarter has progressed,” said Sam L. Susser, President and Chief Executive Officer. “Preliminary results in the second quarter also suggest the worst of the recession is behind us.

“The Texas economy in general is showing signs of recovery in several areas:  Existing home sales and home prices increased in March both sequentially and year-over year, the drilling rig count is climbing, and the index of leading economic indicators is rising.

“Same store sales growth was highest in West Texas, which is being spurred primarily by growing oilfield activity.  The ongoing rebranding of Town & Country stores to the Stripes® brand in West Texas is also having a positive effect on the performance of our West Texas locations.  Although South Texas has rebounded more slowly, we hope to see a pickup in economic activity later this year, which should improve food and beverage sales at our South Texas stores,” Susser said.

“Fuel costs continued the upward trend we saw throughout 2009, which typically compresses our fuel margins.  Retail fuel margins and higher credit card costs negatively impacted our overall gross margin and EBITDA for the quarter, but at 11.1 cents they were still in range of our five-year average for the first quarter, when we normally experience our lowest fuel margins." Over the previous five years first quarter margins have ranged from 8.7 to 12.0 cents per gallon and averaged 10.7 cents.

“We remain very focused on cost control, and saw our efforts reflected in better store labor utilization and reduced G&A expenses this quarter.”

New Convenience Store/Wholesale Dealer Site Update

The Company added two retail stores during the latest quarter, bringing the total number of stores in operation to 527.  Three more stores are currently under construction.

In its wholesale operations, Susser added three new dealer sites, for a total of 393 in operation at the end of the first quarter.

Financing Update

On May 7 the Company closed on a private placement of $425 million of senior unsecured notes with a coupon rate of 8.5% at a price of 98.845% of the principal amount to yield 8.75%.  The new notes mature May 15, 2016 and are callable beginning May 15, 2013 at specified premiums.  The new notes are rated B2/B+ by Moody’s and Standard and Poor’s respectively.  Net proceeds from the sale of the notes, together with cash on hand and borrowings under the Company’s revolving credit facility, were used to redeem the outstanding 10⅝% Senior Notes due 2013, to repay the outstanding amounts under the term credit facility and for related fees and expenses.  The Company also entered into an amended revolving credit facility and extended the maturity to May 2014.  The refinancing extends the maturities of the company’s debt, increases availability under the revolver to the full $120 million and also provides additional flexibility under the new covenants.

In addition, the Company completed sale/leaseback transactions for properties totaling $5.8 million during the first quarter and executed build-to-suit contracts for two new convenience stores.

First Quarter Financial and Operating Highlights

Same-store merchandise sales increased by 2.5 percent compared with an increase of 6.0 percent in the first quarter of 2009.  Merchandise gross profit, net of shortages, totaled $62.4 million, which was flat versus the first quarter of 2009.  Net merchandise margin was 32.7 percent, compared with 34.3 percent a year ago.  The decline in merchandise margin is partly due to higher cigarette prices as well as continued margin pressure across several other categories such as packaged beverages. Total Company merchandise sales were $191.0 million, an increase of 5.0 percent from a year ago.

Retail store fuel volumes increased 2.0 percent from a year ago to 183.1 million gallons for the first quarter.  Average gallons sold per store declined 0.2 percent to 355,200, as compared to a 4.6 percent increase in the first quarter of 2009.  Retail fuel revenues totaled $478.6 million, up 48.6 percent, primarily as a result of an 81-cent-a-gallon increase in motor fuel prices at the pump.  Retail fuel gross margins in the first quarter were 11.1 cents per gallon, or 7.0 cents after deducting credit card expense, compared with 11.8 cents per gallon a year ago, or 9.1 cents after credit card expense.  Retail fuel gross profit was $20.3 million, down 4.3 percent from the first quarter of 2009.

Wholesale fuel volumes sold to Susser’s 393 dealers and other third-party customers during the first quarter declined 2.0 percent from a year ago to 120.0 million gallons. Wholesale fuel revenues increased by 54.3 percent to $258.2 million as a result of a 78-cent-per-gallon increase in the selling price of fuel. Wholesale gross margin was 4.2 cents per gallon, compared with 3.5 cents per gallon a year ago, which increased wholesale fuel gross profit by 18.3 percent to $5.0 million.

Recent Developments

The Company has entered into an agreement to sell its seven Village Market grocery stores and expects the closing to occur during the second quarter.  The transaction is not material to the Company’s assets and terms are subject to a confidentiality agreement.  The transaction is accretive and allows the Company to bring more focus to its core convenience store and Laredo Taco Company® operations.

2010 Guidance

The Company's guidance for 2010 remains unchanged, as follows:  

First Quarter Earnings Conference Call

Susser’s management team will hold a conference call today at 10 a.m. ET (9 a.m. CT) to discuss first quarter results. To participate in the call, dial 480-629-9720 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 May 18 by calling 303-590-3030 and using the pass code 4285925#.  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 and Town & Country banners. Restaurant service is available in more than 300 of its stores, primarily under the proprietary Laredo Taco Company and Country Cookin' brands. The Company also supplies branded motor fuel to over 390 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 gasoline and one principal provider for transportation of substantially all 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.

Financial statements follow

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 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 subsidiaries' revolving credit facility and the indenture governing our senior notes, including for purposes of determining whether we have satisfied certain financial performance maintenance covenants and our ability to borrow additional indebtedness and pay dividends to us;

• securities analysts and other interested parties use them as a measure of financial performance and debt service capabilities;

• they facilitate management's ability to measure operating performance of our business because they assist us in comparing our operating performance on a consistent basis since they remove 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 of directors 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 an alternative to net income as a measure 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 revolving credit facility or senior 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