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EX-32.2 - SECTION 906 CFO CERTIFICATION - Susser Holdings CORPsuss-2012401xexhibit322.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - Susser Holdings CORPsuss-2012401xexhibit321.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - Susser Holdings CORPsuss-2012401xexhibit312.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - Susser Holdings CORPsuss-2012401xexhibit311.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: April 1, 2012
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission File Number: 001-33084 
SUSSER HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
01-0864257
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
4525 Ayers Street
Corpus Christi, Texas 78415
(Address of principal executive offices)
(361) 884-2463
(Registrant’s telephone number, including area code)
N/A
(Former Name, former address and former fiscal year, if changed since last report) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
x
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
 
COMMON STOCK, $0.01 PAR VALUE
 
20,952,785 SHARES
(Class)
 
(Outstanding at May 7, 2012)



SUSSER HOLDINGS CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
 

i


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements

Susser Holdings Corporation
Consolidated Balance Sheets
 
January 1,
2012
 
April 1,
2012
 
 
 
unaudited
 
(in thousands except shares)
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
120,564

 
$
128,305

Accounts receivable, net of allowance for doubtful accounts of $647 at January 1, 2012, and $407 at April 1, 2012
75,275

 
89,727

Inventories, net
98,723

 
105,149

Other current assets
19,620

 
14,720

Total current assets
314,182

 
337,901

Property and equipment, net
474,243

 
485,709

Other assets:
 
 
 
Goodwill
244,398

 
244,398

Intangible assets, net
48,268

 
46,789

Other noncurrent assets
14,879

 
15,952

Total assets
$
1,095,970

 
$
1,130,749

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
143,088

 
$
178,825

Accrued expenses and other current liabilities
49,564

 
49,061

Current maturities of long-term debt
1,492

 
1,511

Total current liabilities
194,144

 
229,397

Revolving line of credit

 

Long-term debt
449,837

 
449,633

Deferred gain, long-term portion
30,888

 
30,330

Deferred tax liability, long-term portion
68,216

 
67,833

Other noncurrent liabilities
17,950

 
17,658

Total liabilities
761,035

 
794,851

Commitments and contingencies:

 

Shareholders’ equity:
 
 
 
Susser Holdings Corporation shareholders’ equity:
 
 
 
Common stock, $.01 par value; 125,000,000 shares authorized; 21,374,451 issued and 20,814,800 outstanding as of January 1, 2012; 21,395,403 issued and 20,954,779 outstanding as of April 1, 2012
210

 
210

Additional paid-in capital
269,368

 
269,587

Treasury stock, common shares, at cost; 559,651 as of January 1, 2012; and 440,624 as of April 1, 2012
(9,629
)
 
(8,358
)
Retained earnings
74,199

 
73,670

Total Susser Holdings Corporation shareholders’ equity
334,148

 
335,109

Noncontrolling interest
787

 
789

Total shareholders’ equity
334,935

 
335,898

Total liabilities and shareholders’ equity
$
1,095,970

 
$
1,130,749


See accompanying notes

1



Susser Holdings Corporation
Consolidated Statements of Operations
Unaudited
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(dollars in thousands, except share and per share amounts)
Revenues:
 
Merchandise sales
$
203,017

 
$
226,070

Motor fuel sales
954,481

 
1,175,206

Other income
11,635

 
13,111

Total revenues
1,169,133

 
1,414,387

Cost of sales:
 
 
 
Merchandise
134,006

 
150,343

Motor fuel
918,961

 
1,140,403

Other
447

 
689

Total cost of sales
1,053,414

 
1,291,435

Gross profit
115,719

 
122,952

Operating expenses:
 
 
 
Personnel
38,409

 
41,912

General and administrative
9,666

 
10,934

Other operating
34,098

 
36,556

Rent
11,316

 
11,772

Loss (gain) on disposal of assets and impairment charge
629

 
(293
)
Depreciation, amortization and accretion
10,902

 
12,563

Total operating expenses
105,020

 
113,444

Income from operations
10,699

 
9,508

Other income (expense):
 
 
 
Interest expense, net
(9,937
)
 
(10,327
)
Other miscellaneous
(34
)
 
(42
)
Total other expense, net
(9,971
)
 
(10,369
)
Income (loss) before income taxes
728

 
(861
)
Income tax (expense) benefit
(750
)
 
335

Net loss
(22
)
 
(526
)
Less: Net income attributable to noncontrolling interests
1

 
2

Net loss attributable to Susser Holdings Corporation
$
(23
)
 
$
(528
)
Net loss per share attributable to Susser Holdings Corporation:
 
 
 
Basic
$
0.00

 
$
(0.03
)
Diluted
$
0.00

 
$
(0.03
)
Weighted average shares outstanding:
 
 
 
Basic
17,078,100

 
20,609,213

Diluted
17,078,100

 
20,609,213



See accompanying notes

2


Susser Holdings Corporation
Consolidated Statement of Cash Flows
Unaudited
 
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net loss
$
(22
)
 
$
(526
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depreciation, amortization and accretion
10,902

 
12,563

Amortization of deferred financing fees/debt premium/discount, net
809

 
853

Loss (gain) on disposal of assets and impairment charge
629

 
(293
)
Non-cash stock-based compensation
888

 
1,172

Deferred income tax
4,703

 
(215
)
Excess tax benefits from stock-based compensation
(1
)
 
(158
)
Changes in operating assets and liabilities:
 
 
 
Receivables
(20,891
)
 
(14,452
)
Inventories
(12,128
)
 
(6,426
)
Other assets
(5,090
)
 
3,889

Accounts payable
40,234

 
35,734

Accrued liabilities
1,872

 
(503
)
Other noncurrent liabilities
(1,071
)
 
(1,076
)
Net cash provided by operating activities
20,834

 
30,562

Cash flows from investing activities:
 
 
 
Capital expenditures
(34,103
)
 
(23,806
)
Purchase of intangibles
(17
)
 
(213
)
Proceeds from disposal of property and equipment
40

 
1,318

Net cash used in investing activities
(34,080
)
 
(22,701
)
Cash flows from financing activities:
 
 
 
Change in notes receivable
(105
)
 
(71
)
Payments on long-term debt
(169
)
 
(366
)
Revolving line of credit, net

 

Loan origination costs
(47
)
 

Proceeds from issuance of equity, net of issuance costs
57

 
263

Purchase of shares for treasury
(66
)
 
(104
)
Excess tax benefits from stock-based compensation
1

 
158

Net cash used in financing activities
(329
)
 
(120
)
Net increase (decrease) in cash
(13,575
)
 
7,741

Cash and cash equivalents at beginning of year
47,943

 
120,564

Cash and cash equivalents at end of period
$
34,368

 
$
128,305

Supplemental disclosure of cash flow information:
 
 
 
Issuance of stock from treasury
$

 
$
(1,375
)


See accompanying notes

3


Susser Holdings Corporation
Notes to Consolidated Financial Statements
Unaudited

1.
Organization and Principles of Consolidation

The consolidated financial statements are composed of Susser Holdings Corporation (“Susser” or the “Company”), a Delaware corporation, and its consolidated subsidiaries, which operate convenience stores and distribute motor fuels in Texas, New Mexico, Oklahoma and Louisiana. The Company was formed in May 2006, and in October 2006 completed an initial public offering (IPO). Susser, through its subsidiaries and predecessors, has been acquiring, operating and supplying motor fuel to service stations and convenience stores since the 1930’s.
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The Company’s primary operations are conducted by the following consolidated subsidiaries:
Stripes LLC (“Stripes”), a Texas Limited Liability Company, operates convenience stores located in Texas, New Mexico and Oklahoma.
Susser Petroleum Company LLC (“SPC”), a Texas Limited Liability Company, distributes motor fuels primarily in Texas, New Mexico, Oklahoma and Louisiana. SPC is a wholly owned subsidiary of Stripes.
The Company also offers environmental, maintenance and construction management services to the petroleum industry (including its own sites) through its subsidiary Applied Petroleum Technologies, Ltd. (“APT”), a Texas limited partnership. Two wholly owned subsidiaries, Susser Holdings, L.L.C. and Susser Finance Corporation, are the issuers of the $425 million of senior notes outstanding at April 1, 2012, but do not conduct any operations (See Note 7). A subsidiary, C&G Investments, LLC, owns a 50% interest in Cash & Go, Ltd. and Cash & Go Management, LLC. Cash & Go, Ltd. currently operates 38 units, located primarily inside Stripes retail stores, which provide short-term loan and check cashing services. The Company accounts for this investment under the equity method, and reflects its share of net earnings in other miscellaneous income and its investment in other noncurrent assets.
All significant intercompany accounts and transactions have been eliminated in consolidation. Transactions and balances of other subsidiaries are not material to the consolidated financial statements. The Company’s fiscal year is 52 or 53 weeks and ends on the Sunday closest to December 31. All references to fiscal 2011 refer to the 52-week period ended January 1, 2012. All references to the first quarter of 2011 and 2012 refer to the 13-week periods ended April 3, 2011 and April 1, 2012, respectively. Stripes and APT follow the same accounting calendar as the Company. SPC uses calendar month accounting periods and ends its fiscal year on December 31.
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim consolidated financial statements have been prepared from the accounting records of the Company and its subsidiaries, and all amounts at April 1, 2012 and for the three months ended April 3, 2011 and April 1, 2012 are unaudited. Pursuant to Regulation S-X, certain information and note disclosures normally included in annual financial statements have been condensed or omitted. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, and which are of a normal, recurring nature.
Our results of operations for the three months ended April 3, 2011 and April 1, 2012 are not necessarily indicative of results to be expected for the full fiscal year. Our business is seasonal and we generally experience higher levels of revenues during the summer months than during the winter months.
The interim consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2012.
Certain line items have been reclassified for presentation purposes. Loan fees were reclassified from investing activities to financing activities and the amortization of deferred financing fees were reclassified from investing activities in the Consolidated Statement of Cash Flows.
In preparing the accompanying unaudited condensed consolidated financial statements, the Company has reviewed, as determined necessary by the Company's management, events that have occurred after April 1, 2012, up until the issuance of these financial statements.
 

4


2.
New Accounting Pronouncements
FASB ASU No. 2011-04. In May 2011, the FASB issued ASU No. 2011-04, "Fair Value Measurement, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASC 820– Fair Value Measurement)." This guidance amends ASC 820 on fair value measurements and disclosures to (1) clarify the board’s intent in respect of existing measurement guidance, (2) revise certain measurement guidance that changes or modifies a principle, and (3) add disclosure requirements concerning the measurement uncertainty of Level 3 measurements. The ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of this amended guidance did not have a material effect on the Company's consolidated financial position, results of operations, cash flows or related disclosures.
FASB ASU No. 2011-05. In June 2011, the FASB issued ASU No. 2011-05, "Comprehensive Income: Presentation of Comprehensive Income (ASC 220– Comprehensive Income)." This guidance removes the presentation options in ASC 220 and requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU does not change the items that must be reported in other comprehensive income. It is effective for fiscal years beginning after December 15, 2011 (and for interim periods within such years). In December 2011, the FASB issued ASU No. 2011-12, which deferred certain aspects of ASU NO. 2011-05. The Company adopted this accounting standard in the first quarter of Fiscal 2012. This standard affects presentation and disclosure, and therefore will not affect the Company's consolidated financial position, results of operations or cash flows.
FASB ASU No. 2011-08. In September 2011, the FASB issued ASU NO. 2011-08, "Intangibles-Goodwill and Other (ASC350 -20-Goodwill): Testing Goodwill for Impairment." This guidance permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, but early adoption is permitted. The Company adopted ASU No. 2011-08 during the fourth quarter of Fiscal 2011 and used it to perform the annual goodwill impairment test. This amendment affects testing steps only, and therefore adoption did not affect the Company's consolidated financial position, results of operations or cash flows.
 
3.
Accounts Receivable

Accounts receivable consisted of the following:
 
January 1,
2012
 
April 1,
2012
 
(in thousands)
Accounts receivable, trade
$
31,926

 
$
46,358

Credit card receivables
21,246

 
25,756

Receivable from state reimbursement funds
346

 
47

Vendor receivables for rebates, branding and others
9,417

 
8,256

ATM fund receivables
7,510

 
8,786

Notes receivable, short-term
326

 
277

Other receivables
5,151

 
654

Allowance for uncollectible accounts, trade
(615
)
 
(385
)
Allowance for uncollectible accounts, environmental
(32
)
 
(22
)
Accounts receivable, net
$
75,275

 
$
89,727

 

5


4.
Inventories

Inventories consisted of the following:
 
January 1,
2012
 
April 1,
2012
 
(in thousands)
Merchandise
$
54,480

 
$
52,387

Fuel-retail
28,680

 
32,619

Fuel-wholesale consignment
5,014

 
5,699

Fuel-wholesale bulk
1,180

 
4,995

Lottery
2,044

 
2,045

Equipment and maintenance spare parts
8,016

 
8,040

Allowance for inventory shortage and obsolescence
(691
)
 
(636
)
Inventories, net
$
98,723

 
$
105,149


5.
Property and Equipment

Property and equipment consisted of the following:
 
January 1,
2012
 
April 1,
2012
 
(in thousands)
Land
$
145,270

 
$
150,646

Buildings and leasehold improvements
279,931

 
286,679

Equipment
231,201

 
236,753

Construction in progress
13,634

 
18,263

Total property and equipment
670,036

 
692,341

Less: Accumulated depreciation
195,793

 
206,632

Property and equipment, net
$
474,243

 
$
485,709

 
6.
Goodwill and Other Intangible Assets

Goodwill is not being amortized, but is tested annually for impairment, or more frequently if events and circumstances indicate that the asset might be impaired. The annual impairment test is performed as of the first day of the fourth quarter of the fiscal year. At January 1, 2012 and April 1, 2012, we had $244.4 million of goodwill recorded in conjunction with past business combinations. The 2011 impairment analysis indicated no impairment in goodwill. As of April 1, 2012, we evaluated potential impairment indicators and we believe no indicators of impairment occurred during the first quarter of 2012, and we believe the assumptions used in the analysis performed in 2011 are still relevant and indicative of our current operating environment. As a result, no impairment was recorded to goodwill during the first three months of 2012.
The Company has finite-lived intangible assets recorded that are amortized and indefinite-lived assets that do not amortize. The indefinite-lived assets are evaluated annually for impairment. The finite-lived assets consist of supply agreements, favorable/unfavorable leasehold arrangements, loan origination costs, trade names and certain franchise rights, all of which are amortized over the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. Supply agreements are being amortized over a weighted average period of approximately nine years. Favorable/unfavorable leasehold arrangements are being amortized over a weighted average period of approximately eleven years. The Laredo Taco Company trade name is being amortized over fifteen years. Loan origination costs are amortized over the life of the underlying debt as an increase to interest expense.
The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets, excluding goodwill, at January 1, 2012 and April 1, 2012:
 

6


 
January 1, 2012
 
April 1, 2012
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Amount
 
(in thousands)
Unamortized
 
 
 
 
 
 
 
 
 
 
 
Trade name
$
45

 
$

 
$
45

 
$
45

 
$

 
$
45

Franchise rights
489

 

 
489

 
489

 

 
489

Liquor licenses
12,038

 

 
12,038

 
12,038

 

 
12,038

Amortized
 
 
 
 

 

 

 

Supply agreements
29,654

 
6,432

 
23,222

 
29,683

 
7,181

 
22,502

Favorable leasehold arrangements, net
3,584

 
3,162

 
422

 
324

 
(124
)
 
448

Loan origination costs
14,396

 
5,537

 
8,859

 
14,396

 
6,209

 
8,187

Trade names
5,756

 
3,209

 
2,547

 
5,756

 
3,279

 
2,477

Other
690

 
44

 
646

 
690

 
87

 
603

Intangible assets, net
$
66,652

 
$
18,384

 
$
48,268

 
$
63,421

 
$
16,632

 
$
46,789

 
7.
Long-Term Debt

Long-term debt consisted of the following:
 
January 1,
2012
 
April 1,
2012
 
(in thousands)
8.5% senior unsecured notes due 2016
$
425,000

 
$
425,000

Revolving credit agreement, bearing interest at Prime or LIBOR plus applicable margin

 

Other notes payable
30,139

 
29,773

Unamortized discount
(3,810
)
 
(3,629
)
Total debt
451,329

 
451,144

Less: Current maturities
1,492

 
1,511

Long-term debt, net of current maturities
$
449,837

 
$
449,633

The fair value of debt as of April 1, 2012, is estimated to be approximately $495.1 million, based on the reported trading activity of the senior unsecured notes at that time, and the par value of the revolving credit facility and other notes payable. The estimated fair value of long-term debt is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues as of the measurement date. Other notes payable consists primarily of long-term variable-rate mortgage notes with maturity dates ranging from 2015 to 2016.
Senior Unsecured Notes
On May 7, 2010, the Company, through its subsidiaries Susser Holdings, L.L.C. and Susser Finance Corporation, issued $425 million 8.50% Senior Notes due 2016 (the “2016 Notes”). The 2016 Notes pay interest semi-annually in arrears on May 15 and November 15 of each year. The 2016 Notes mature on May 15, 2016 and are guaranteed by the Company and each existing and future domestic subsidiary of the Company other than certain non-operating subsidiaries and Susser Company, Ltd.
At any time prior to May 15, 2013, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of the 2016 Notes at a redemption price of 108.500% of the principal amount, plus accrued and unpaid interest and liquidated damages, if any, to the redemption date, with the net cash proceeds of certain public equity offerings. The 2016 Notes may also be redeemed prior to May 15, 2013, in whole or in part, at the option of the Company at a redemption price equal to 100% of the principal amount of the 2016 Notes redeemed plus a make-whole premium and accrued and unpaid interest and liquidated damages, if any, to the applicable redemption date.
On or after May 15, 2013, the Company may redeem all or any part of the 2016 Notes at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and liquidated damages, if any, to the applicable redemption date, if redeemed during the twelve month period beginning on May 15 of the years indicated

7


below:
Year
Price
2013
104.250
%
2014
102.125
%
2015
100.000
%
The Company must offer to purchase the 2016 Notes at 101% of the aggregate principal amount of the notes, plus accrued and unpaid interest, in the event of certain kinds of changes of control. The Company must offer to purchase the Notes at 100% of the aggregate principal amount of the notes, plus accrued and unpaid interest, if excess proceeds remain after the consummation of asset sales.
The 2016 Notes indenture contains customary covenants that limit, among other things, the ability of the Company and its restricted subsidiaries to: incur additional debt; make restricted payments (including paying dividends on, redeeming or repurchasing their capital stock); dispose of its assets; grant liens on its assets; engage in transactions with affiliates; merge, consolidate or transfer substantially all of its assets; and enter into certain sale/leaseback transactions. The indenture also includes certain customary events of default (subject to customary exceptions, baskets and qualifications) including, but not limited to: failure to pay principal, interest, premium or liquidated damages when due; failure to comply with certain covenants; default on certain other indebtedness; certain monetary judgment defaults; bankruptcy and insolvency defaults; and actual or asserted impairment of any note guarantee.
Credit Facilities
On May 7, 2010, Susser Holdings, L.L.C. entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a syndicate of financial institutions providing for a new four year revolving credit facility (the “Revolver”) in an aggregate principal amount of up to $120 million, with an option to increase the facility by $40 million, due May 2014. The Company and each of its existing and future direct and indirect subsidiaries (other than (i) any subsidiary that is a “controlled foreign corporation” under the Internal Revenue Code or a subsidiary that is held directly or indirectly by a “controlled foreign corporation,” (ii) Susser Company, Ltd. and (iii) certain future non-operating subsidiaries) are guarantors under the Credit Agreement.
Availability under the Revolver is subject to a borrowing base equal to the lesser of (x) (a) 85% of eligible accounts receivable plus (b) 55% of eligible inventory plus (c) 60% of the fair market value of certain designated eligible real property, which shall not exceed 45% of the aggregate borrowing base amount, minus (d) such reserves as the administrative agent may establish in its reasonable credit judgment acting in good faith (including, without limitation, reserves for exposure under swap contracts and obligations relating to treasury management products) and (y) the greater of (i) $160 million and (ii) (A) 85% of gross accounts receivable plus (B) 60% of gross inventory.
The interest rates under the Revolver are calculated, at the Company’s option, at either a base rate or a LIBOR rate plus, in each case, a margin. With respect to LIBOR rate loans, interest will be payable at the end of each selected interest period but no less frequently than quarterly. With respect to base rate loans, interest will be payable quarterly in arrears. The Revolver may be prepaid at any time in whole or in part without premium or penalty, other than breakage costs if applicable, and requires the maintenance of a maximum senior secured leverage ratio and a minimum fixed charge coverage ratio. We were in compliance with the required leverage and fixed charge coverage ratios as of April 1, 2012.
The Revolver contains customary representations, warranties and certain customary covenants (subject to customary exceptions, thresholds and qualifications) that impose certain affirmative obligations upon and restrict the ability of the Company and its subsidiaries to, among other things: incur liens; incur additional indebtedness, guarantees or other contingent obligations; engage in mergers and consolidations; make sales, transfers and other dispositions of property and assets; make loans, acquisitions, joint ventures and other investments; declare dividends; redeem and repurchase shares of equity holders; create new subsidiaries; become a general partner in any partnership; prepay, redeem or repurchase debt; make capital expenditures; grant negative pledges; change the nature of business; amend organizational documents and other material agreements; change accounting policies or reporting practices; and permit Stripes Holdings LLC to be other than a passive holding company.
The loans under the Revolver are secured by a first priority security interest in (a) 100% of the outstanding ownership interests in Susser Holdings, L.L.C. and of each of the Company’s existing and future direct and indirect subsidiaries (subject to certain exclusions and limited, in the case of each foreign subsidiary (i) to first-tier foreign subsidiaries and (ii) with respect to any controlled foreign corporation, to 65% of the outstanding voting stock of each such foreign subsidiary); (b) all present and future intercompany debt of the Company, Susser Holdings, L.L.C. and each subsidiary guarantor; (c) real property included in

8


the borrowing base, including equipment and fixtures located on such real property, (d) substantially all of the present and future personal property and assets of the Company, Susser Holdings, L.L.C. and each subsidiary guarantor, including, but not limited to, inventory, accounts receivable, license rights, patents, trademarks, trade names, copyrights, other intellectual property and other general intangibles, insurance proceeds and instruments; and (e) all proceeds and products of all of the foregoing.
The Revolver also includes certain customary events of default (subject to customary exceptions, baskets and qualifications) including, but not limited to: failure to pay principal, interest, fees or other amounts when due; any representation or warranty proving to have been materially incorrect when made or confirmed; failure to perform or observe covenants set forth in the loan documentation; default on certain other indebtedness; certain monetary judgment defaults and material non-monetary judgment defaults; bankruptcy and insolvency defaults; actual or asserted impairment of loan documentation or security; a change of control; and customary ERISA defaults.
As of April 1, 2012, we had no outstanding borrowings under the Revolver and $15.3 million in standby letters of credit. Our borrowing base in effect at April 1, 2012 allowed a maximum borrowing, including outstanding letters of credit, of $120.0 million. Our unused availability on the revolver at April 1, 2012, was $104.7 million.
Fair Value Measurements
We use fair value measurements to measure, among other items, purchased assets and investments, leases and derivative contracts. We also use them to assess impairment of properties, equipment, intangible assets and goodwill. Fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters, or is derived from such prices or parameters. Where observable prices or inputs are not available, use of unobservable prices or inputs is used to estimate the current fair value, often using an internal valuation model. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the item being valued.

ASC 820 “Fair Value Measurements and Disclosures” prioritizes the inputs used in measuring fair value into the following hierarchy:
Level 1
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
 
 
Level 2
Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
 
 
Level 3
Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
From time to time, the Company enters into interest rate swaps to either reduce the impact of changes in interest rates on its floating rate long-term debt or to take advantage of favorable variable interest rates compared to its fixed rate long-term debt in order to manage interest rate risk exposure. We had no interest rate swaps outstanding at January 1, 2012 or April 1, 2012.
The Company also periodically enters into derivatives, such as futures and options, to manage its fuel price risk, primarily related to bulk purchases of fuel. We hedge this inventory risk through the use of fuel futures contracts which are matched in quantity and timing to the anticipated usage of the inventory. Bulk fuel purchases and fuel hedging positions have not been material to our operations. The fair value of our derivative contracts is measured using Level 2 inputs, and is determined by either market prices on an active market for similar assets or by prices quoted by a broker or other market-corroborated prices. This price does not differ materially from the amount that would be paid to transfer the liability to a new obligor due to the short term nature of these contracts. At January 1, 2012, the Company held fuel futures contracts with a fair value of ($12,800) (16 contracts representing 0.6 million gallons). At April 1, 2012, the Company held fuel futures contracts with a fair value of ($140,700) (95 contracts representing 4.0 million gallons), which are classified in other current assets in the Company’s consolidated balance sheets. The Company recognized a loss during the first three months of 2011 and 2012 related to these contracts of $0.9 million and $0.6 million, respectively. The loss realized on hedging contracts is substantially offset by increased profitability on sale of fuel inventory.
 
8.
Commitments and Contingencies

Leases
The Company leases a portion of its convenience store properties under non-cancellable operating leases whose initial

9


terms are typically 10 to 20 years, along with options that permit renewals for additional periods. Minimum rent is expensed on a straight-line basis over the term of the lease. In addition to minimum rental payments, certain leases require additional contingent payments based on sales or motor fuel volume. The Company is typically responsible for payment of real estate taxes, maintenance expenses and insurance.

The components of net rent expense are as follows:
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(in thousands)
Cash rent:
 
Store base rent
$
11,163

 
$
11,554

Equipment rent
507

 
656

Contingent rent
67

 
70

Total cash rent
$
11,737

 
$
12,280

Non-cash rent:
 
 
 
Straight-line rent
127

 
50

Amortization of deferred gain
(548
)
 
(558
)
Net rent expense
$
11,316

 
$
11,772

Letters of Credit
We were contingently liable for $15.3 million related to irrevocable letters of credit required by various insurers and suppliers at April 1, 2012.
 
9.
Interest Expense and Interest Income

The components of net interest expense are as follows:
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(in thousands)
Cash interest expense
$
9,415

 
$
9,662

Capitalized interest
(162
)
 
(157
)
Amortization of loan costs and issuance (premium)/discount, net
808

 
853

Cash interest income
(124
)
 
(31
)
Interest expense, net
$
9,937

 
$
10,327




10


10.
Income Tax

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the three months ended April 1, 2012 and April 3, 2011 is as follows:
 
Three Months Ended
 
April 1, 2012
 
(in thousands)
 
Tax rate %
Tax at statutory federal rate
$
(302
)
 
35.0
%
State and local tax, net of federal benefit
(24
)
 
2.7
%
Other
(9
)
 
1.0
%
Tax benefit per financial statement
$
(335
)
 
38.7
%
 
 
 
Three Months Ended
 
April 3, 2011
 
(in thousands)
 
Tax rate %
Tax at statutory federal rate
$
255

 
35.0
%
State and local tax, net of federal benefit
436

 
60.0
%
Other
59

 
8.1
%
Tax expense per financial statement
$
750

 
103.1
%
Included in our provision for income tax is a tax imposed by the state of Texas of 0.5% of gross margin in Texas (“margin tax”). Our interim provision for income taxes is based on our estimated annual effective tax rate for the year.
It is the Company’s policy to recognize interest and penalties related to uncertain tax positions in general and administrative expense. The Company became a taxpayer at October 24, 2006 with the conversion to a “C” corporation, and the statute of limitations remains open on all years since then. The Company files income and gross margin tax returns in the U.S. federal jurisdiction, Texas, Oklahoma, New Mexico and Louisiana. The Company is subject to examinations in all jurisdictions for all returns for the 2007 through 2011 tax years.
As of April 1, 2012, all tax positions taken by the Company are considered highly certain. There are no positions the Company reasonably anticipates will significantly increase or decrease within 12 months of the reporting date, and therefore no adjustments have been recorded related to unrecognized tax benefits.
 
11.
Shareholders’ Equity

On October 24, 2006, Susser Holdings Corporation completed an IPO of 7,475,000 shares of its common stock at a price of $16.50 per share. In December 2011, the Company completed the public offering of 3,775,000 shares of its common stock at a price of $21.75 per share. The net proceeds from the offering were approximately $77.5 million, after deducting underwriting discounts, commission and offering expenses. A total of 125,000,000 shares of common stock have been authorized, $0.01 par value, of which 21,374,451 were issued and 20,814,800 were outstanding as of January 1, 2012, and 21,395,403 were issued and 20,954,779 were outstanding as of April 1, 2012. Included in these amounts are 225,810 and 316,092 shares as of January 1, 2012 and April 1, 2012, respectively, which represent restricted shares that are not yet vested and have no voting rights. Treasury shares consist of 559,651 and 440,624 shares as of January 1, 2012 and April 1, 2012, respectively, issued as restricted shares which were forfeited prior to vesting, were withheld to pay employee payroll taxes upon vesting or were repurchased in the open market. Options to purchase 801,528 shares of common stock are outstanding as of April 1, 2012, 310,578 of which are vested. Additionally, 443,408 restricted stock units are outstanding, of which 261,570 remain subject to performance criteria in addition to time-vesting (See Note 12).
On June 2, 2011, the Company announced the approval of a stock repurchase program pursuant to which the Company may elect to repurchase up to $15 million of its outstanding common stock. Purchases can be made from time to time on the open market or in privately negotiated transactions. Timing of the purchases and the amount of stock purchased will be determined at the discretion of the Company’s management and may include purchases through one or more broker-assisted plans (including 10b5-1 and/or 10b-18 plans). The repurchase authorization expires December 31, 2012. Included in treasury shares at April 1, 2012 are 483,843 shares repurchased and settled by the Company during 2011 pursuant to the stock repurchase program at a total value of $9.0 million.

11


A total of 25,000,000 preferred shares have been authorized, par value $0.01 per share, although none have been issued.
 
12.
Share-Based Compensation

The Company has granted options, restricted stock and restricted stock units subject to vesting requirements under its 2006 Equity Incentive Plan. Vesting of most grants is over two to four years. The restricted stock units are subject to performance criteria in addition to time vesting requirements. Following is a summary of options, restricted stock and restricted stock units which have been granted under the Company’s plan:
 
Stock Options
 
Number of
Options
Outstanding
 
Weighted
Average Exercise
Price
Balance at January 2, 2011
798,205

 
12.11

Granted
73,500

 
15.20

Exercised
(48,082
)
 
11.81

Forfeited or expired
(30,129
)
 
15.14

Balance at January 1, 2012
793,494

 
12.30

Granted
25,000

 
24.71

Exercised
(15,466
)
 
10.43

Forfeited or expired
(1,500
)
 
13.51

Balance at April 1, 2012
801,528

 
12.71

Exercisable at April 1, 2012
310,578

 
$
12.94

Vested and expected to vest at April 1, 2012
609,202

 
$
12.96



 
Restricted Stock
 
Number of
Shares
 
Grant-Date
Average
Fair Value
Per Share
Nonvested at January 2, 2011
297,919

 
11.48

Granted
85,163

 
13.73

Vested
(145,520
)
 
12.12

Forfeited
(11,752
)
 
9.41

Nonvested at January 1, 2012
225,810

 
12.02

Granted
124,428

 
24.71

Vested
(33,021
)
 
15.70

Forfeited
(1,125
)
 
8.75

Nonvested at April 1, 2012
316,092

 
$
16.64



12


 
 
Restricted Stock Units
 
 
Number of
Units
 
Grant-Date
Average
Fair Value
Per Unit
Nonvested at January 2, 2011
111,000

 
8.75

Granted
207,700

 
13.64

Vested
(52,000
)
 
8.75

Forfeited (1)
(82,362
)
 
13.06

Nonvested at January 1, 2012
184,338

 
12.34

Granted
261,570

 
24.71

Vested

 

Forfeited
(2,500
)
 
12.56

Nonvested at April 1, 2012
443,408

 
$
19.63

Remain subject to performance criteria
261,570

 
$
24.71

 
 
 
 
 
(1) Includes a total of 57,862 units canceled due to partial attainment of maximum performance criteria.

During the first quarter of 2012, we granted 25,000 options to purchase stock at an exercise price equal to the closing price of the related common stock on the date the options were granted. These options had an aggregate fair value of $0.3 million, which will be amortized to expense over the option’s requisite service periods. During the first quarter of 2012, we granted 124,428 shares of restricted stock with an aggregate fair value of $3.1 million, which will be amortized to expense over the requisite service period. In addition, we granted 261,570 restricted stock units with an aggregate fair value of $6.5 million during the first quarter of 2012, which will be amortized to expense over the requisite service period. These restricted stock units are subject to performance criteria based on 2012 results, in addition to time vesting.
We recognized non-cash stock compensation expense of $0.9 million and $1.2 million during the three months ended April 3, 2011 and April 1, 2012, respectively, which is included in general and administrative expense.
 
13.
Segment Reporting

The Company operates its business in two primary operating segments, both of which are included as reportable segments. No operating segments have been aggregated in identifying the two reportable segments. The retail segment, Stripes, operates retail convenience stores in Texas, New Mexico and Oklahoma that sell merchandise, prepared food and motor fuel, and also offer a variety of services including car washes, lottery, ATM, money orders, prepaid phone cards and wireless services and movie rentals. The wholesale segment, SPC, purchases fuel from a number of refiners and supplies it to the Company’s retail stores, to independently-owned dealer stations under long-term supply agreements and to other end users of motor fuel. Sales of fuel from the wholesale to retail segment are delivered at cost, including tax and freight. This amount is reflected in intercompany eliminations of fuel revenue. There are no customers who are individually material. Amounts in the “All Other” column include APT, corporate overhead and other costs not allocated to the two primary segments.

13


Segment Financial Data for the Three Months Ended April 3, 2011
(dollars and gallons in thousands)
 
 
Retail
Segment
 
Wholesale
Segment
 
Intercompany
Eliminations
 
All Other
 
Totals
Revenue:
 
Merchandise
$
203,017

 
$

 
$

 
$

 
$
203,017

Fuel
618,120

 
848,719

 
(512,358
)
 

 
954,481

Other
8,540

 
5,712

 
(2,975
)
 
358

 
11,635

Total revenue
829,677

 
854,431

 
(515,333
)
 
358

 
1,169,133

Gross profit:
 
 
 
 
 
 
 
 
 
Merchandise
69,011

 

 

 

 
69,011

Fuel
29,313

 
6,207

 

 

 
35,520

Other
8,540

 
2,629

 
(275
)
 
294

 
11,188

Total gross profit
106,864

 
8,836

 
(275
)
 
294

 
115,719

Selling, general and administrative
86,491

 
4,206

 
(275
)
 
3,067

 
93,489

Depreciation, amortization and accretion
9,302

 
1,296

 

 
304

 
10,902

Other operating expenses (income) (1)
582

 
100

 

 
(53
)
 
629

Operating income (loss)
$
10,489

 
$
3,234

 
$

 
$
(3,024
)
 
$
10,699

Gallons
191,302

 
311,097

 
(190,090
)
 

 
312,309

Gross capital expenditures (2)
$
32,422

 
$
1,698

 
$

 
$

 
$
34,120

 
 
 
 
 
 
 
 
 
 
 
(1) Includes loss (gain) on disposal of assets and impairment charges.
(2) Gross capital expenditures include acquisitions and purchases of intangible assets.

Segment Financial Data for the Three Months Ended April 1, 2012
(dollars and gallons in thousands)
 
 
Retail
Segment
 
Wholesale
Segment
 
Intercompany
Eliminations
 
All Other
 
Totals
Revenue:
 
Merchandise
$
226,070

 
$

 
$

 
$

 
$
226,070

Fuel
736,405

 
1,069,244

 
(630,443
)
 

 
1,175,206

Other
9,535

 
6,738

 
(3,604
)
 
442

 
13,111

Total revenue
972,010

 
1,075,982

 
(634,047
)
 
442

 
1,414,387

Gross profit:
 
 
 
 
 
 
 
 
 
Merchandise
75,727

 

 

 

 
75,727

Fuel
27,725

 
7,078

 

 

 
34,803

Other
9,535

 
2,800

 
(275
)
 
362

 
12,422

Total gross profit
112,987

 
9,878

 
(275
)
 
362

 
122,952

Selling, general and administrative
93,725

 
4,656

 
(275
)
 
3,068

 
101,174

Depreciation, amortization and accretion
10,434

 
1,884

 

 
245

 
12,563

Other operating expenses (income) (1)
(404
)
 
111

 

 

 
(293
)
Operating income (loss)
$
9,232

 
$
3,227

 
$

 
$
(2,951
)
 
$
9,508

Gallons
208,137

 
351,367

 
(209,786
)
 

 
349,718

Gross capital expenditures (2)
$
22,832

 
$
1,187

 
$

 
$

 
$
24,019

 
 
 
 
 
 
 
 
 
 
 
(1) Includes loss (gain) on disposal of assets and impairment charges.
(2) Gross capital expenditures include acquisitions and purchases of intangible assets.



14


14.
Earnings Per Share

Basic EPS which excludes dilution, is computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common units. Dilutive EPS includes in-the-money stock options and unvested stock using the treasury stock method. During a net loss period, the assumed exercise of in-the-money stock options and unvested stock has an anti-dilutive effect, and therefore such potential shares, unvested stock and unvested stock units are excluded from the diluted EPS computation.
Per share information is based on the weighted average number of common shares outstanding during each period for the basic computation and, if dilutive, the weighted average number of potential common shares resulting from the assumed conversion of outstanding stock options, unvested stock and unvested stock units for the diluted computation. Units not included in the denominator for basic EPS but evaluated for inclusion in the denominator for diluted EPS included options, unvested restricted stock and unvested restricted stock units granted under the 2006 Equity Incentive Plan (See Note 12).
A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows:
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(dollars in thousands, except per share data)
Net loss attributable to Susser Holdings Corporation
$
(23
)
 
$
(528
)
Denominator for basic earnings per share:
 
 
 
Weighted average number of common shares outstanding during the period
17,078,100

 
20,609,213

Incremental common shares attributable to outstanding dilutive options and restricted shares/units

 

Denominator for diluted earnings per common share
17,078,100

 
20,609,213

Net loss per share attributable to Susser Holdings Corporation:
 
 
 
Per common share – basic
$
0.00

 
$
(0.03
)
Per common share – diluted
$
0.00

 
$
(0.03
)
Options and non-vested restricted shares/units not included in diluted net income (loss) attributable to Susser Holdings Corporation common shareholders because the effect would be anti-dilutive
450,166

 
538,596


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report. Additional discussion and analysis related to our company is contained in our Annual Report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended January 1, 2012. Our fiscal year contains either 52 or 53 weeks and ends on the Sunday closest to December 31. All references to the first quarter of 2011 and 2012 refer to the 13-week periods ended April 3, 2011 and April 1, 2012, respectively. EBITDA, Adjusted EBITDA, and Adjusted EBITDAR are non-GAAP financial measures of performance and liquidity that have limitations and should not be considered as a substitute for net income or cash provided by (used in) operating activities. Please see footnote (b) under “Key Operating Metrics” below for a discussion of our use of EBITDA, Adjusted EBITDA, and Adjusted EBITDAR in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a reconciliation to net income and cash provided by (used in) operating activities for the periods presented.
Forward-Looking Statements
This report, including without limitation, our discussion and analysis of our financial condition and results of operations, contains statements that we believe are “forward-looking statements” under the Private Securities Litigation Reform Act of 1995 and are intended to enjoy protection under the safe harbor for forward-looking statements provided by that Act. These forward-looking statements generally can be identified by use of phrases such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “forecast” or other similar words or phrases. Descriptions of our objectives, goals, targets, plans, strategies, costs, anticipated capital expenditures, expected cost savings and benefits are also forward-looking statements. These forward-looking statements are based on our current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking

15


statements, including:
Competitive pressures from convenience stores, gasoline stations, other non-traditional retailers located in our markets and other wholesale fuel distributors;
Volatility in crude oil and wholesale petroleum costs;
Increasing consumer preferences for alternative motor fuels, or improvements in fuel efficiency;
Intense competition and fragmentation in the wholesale motor fuel distribution industry;
The operation of our retail stores in close proximity to stores of our dealers;
Seasonal trends in the industries in which we operate;
Severe or unfavorable weather conditions;
Cross-border risks associated with the concentration of our stores in markets bordering Mexico;
Inability to build or acquire and successfully integrate new stores;
Our ability to comply with federal and state regulations including those related to environmental matters and the sale of alcohol and cigarettes and employment laws and health benefits;
Dangers inherent in storing and transporting motor fuel;
Pending or future consumer or other litigation;
Wholesale cost increases of tobacco products or future legislation or campaigns to discourage smoking;
Litigation or adverse publicity concerning food quality, food safety or other health concerns related to our restaurant facilities;
Dependence on two principal suppliers for merchandise;
Dependence on two principal suppliers for motor fuel;
Dependence on suppliers for credit terms;
Dependence on senior management and the ability to attract qualified employees;
Acts of war and terrorism;
Risks relating to our substantial indebtedness and dependence on our subsidiaries for cash flow generation;
Dependence on our information technology systems;
Changes in accounting standards, policies or estimates;
Impairment of goodwill or indefinite lived assets; and
Other unforeseen factors.
For a full discussion of these and other risks and uncertainties, please refer to “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended January 1, 2012, and in each subsequent quarterly report on Form 10-Q, including this filing. The list of factors that could affect future performance and the accuracy of forward-looking statements are illustrative, but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The forward-looking statements included in this report are based on, and include, our estimates as of the date hereof. We anticipate that subsequent events and market developments will cause our estimates to change. However, 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 in the future.

Overview
We are the largest non-refining operator in Texas of convenience stores based on store count and we believe we are the largest non-refining motor fuel distributor by gallons in Texas. Our operations include retail convenience stores and wholesale motor fuel distribution. As of April 1, 2012, our retail segment operated 540 convenience stores in Texas, New Mexico and Oklahoma offering merchandise, food service, motor fuel and other services.

16


For the three months ended April 1, 2012, we sold 349.7 million gallons of branded and unbranded motor fuel. We purchase fuel directly from refiners and distribute it to our retail convenience stores, contracted independent operators of convenience stores (“dealers”), unbranded convenience stores and other commercial users. We believe our combined retail/wholesale business model makes it possible for us to pursue strategic acquisition opportunities and operate acquired properties under either format, providing an optimized return on investment. Our market share and scale allows the integration of new or acquired stores while minimizing overhead costs. In addition, we believe our food service and merchandising offerings distinguish us from our competition, providing the opportunity for increased traffic in our stores.
We opened one new retail store during the first quarter and closed two, for a total of 540 retail stores operated at the end of the quarter. Three additional stores have been opened and one has closed to date in the second quarter. We have 11 retail stores currently under construction, and expect to open a total of 25 to 30 new retail stores during 2012. We added seven dealer sites and discontinued five during the first quarter, for a total of 567 dealer sites as of the end of the quarter in our wholesale segment, and expect to add 25 to 35 dealer sites during 2012.
Our total revenues, net loss attributable to Susser Holdings Corporation and Adjusted EBITDA were $1,414.4 million, ($0.5) million and $22.9 million, respectively, for first quarter 2012, compared to $1,169.1 million, ($23.0) thousand and $23.1 million, respectively, for first quarter 2011.  Our business is seasonal, and we generally experience higher sales and profitability in the second and third quarters during the summer activity months and lowest during the winter months. For a description of our results of operations on a quarterly basis see “Quarterly Results of Operations and Seasonality.”
We typically experience lower fuel margins in periods when the cost of fuel increases gradually, and higher fuel margins in periods when the cost of fuel declines or is more volatile. We report retail fuel margins before credit card fees, but higher fuel prices result in higher credit card costs, which tends to drive fuel margins higher to cover the additional credit card fees. Additionally, our fuel margins have historically exhibited seasonal differences, with lower fuel margins during the first and fourth quarters and the highest fuel margins in the second or third quarter of the year. Crude oil cost during the first quarter of 2012 was 9% higher on average than in the first quarter of 2011, but was less volatile than the prior year. Based on West Texas Intermediate ("WTI") spot prices, the cost of crude oil during first quarter 2012 was approximately $103 per barrel at both the beginning and the end of the quarter, as well as the average for the quarter, although there were both increases and decreases in cost throughout the quarter. However, wholesale gasoline costs increased throughout the first quarter, with the quarter-end cost approximately 65 cents per gallon higher than at the beginning of the quarter. Our retail fuel margin for the first quarter of 2012 averaged 13.3 cents per gallon compared to 15.3 cents per gallon for the first quarter of 2011 and an average of 12.4 cents per gallon for the first quarter of the previous five years. After deducting credit card fees, our retail fuel margin for the first quarter of 2012 was 7.9 cents per gallon compared to 10.2 cents a year ago. Fuel gross profit represented 28.3% of our consolidated gross profit for the first three months of 2012 versus 30.7% in the first three months of 2011. For our retail division, fuel represented 24.5% of retail gross profit for the first three months of 2012.
The economy in Texas, where the majority of our operations are conducted, continues to fare better than many other parts of the nation, partly buoyed by a relatively stable housing market, a healthy regional banking market and relatively strong population growth. Additionally, our business has remained generally more resilient than many other retail formats. We have reported positive comparable merchandise results in 19 of the last 20 quarters, and expect 2012 to produce our 24th consecutive annual increase in same-store merchandise sales, with first quarter growth of 6.7%. We also saw a 5.8% increase in average gallons sold per retail store for the first quarter, driven primarily by growth in diesel volume, which we believe is primarily attributable to increased freight driven by manufacturing, agriculture and oil and gas activity.
We believe we have adequate liquidity and financial flexibility to continue to operate and grow our business. Our liquidity position continued to strengthen during the first quarter. We have had no borrowings on our $120 million revolving credit facility since June 2010, and at the end of the first quarter had $104.7 million of unused availability, in addition to $128.3 million of cash on the balance sheet.

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

17


 
 
Three Months Ended
 
  
April 3,
2011
 
April 1,
2012
 
 
(dollars and gallons in thousands, except motor fuel pricing and gross profit per gallon)
Revenue:
 
 
 
Merchandise sales
$
203,017

 
$
226,070

Motor fuel—retail
618,120

 
736,405

Motor fuel—wholesale
336,361

 
438,801

Other
11,635

 
13,111

Total revenue
$
1,169,133

 
$
1,414,387

Gross profit:
 
 
 
Merchandise
$
69,011

 
$
75,727

Motor fuel—retail
29,313

 
27,725

Motor fuel—wholesale
6,207

 
7,078

Other
11,188

 
12,422

Total gross profit
$
115,719

 
$
122,952

Adjusted EBITDA (2):
 
 
 
Retail
$
20,373

 
$
19,262

Wholesale
4,630

 
5,222

Other
(1,886
)
 
(1,536
)
Total Adjusted EBITDA
$
23,117

 
$
22,948

Retail merchandise margin
34.0
%
 
33.5
%
Merchandise same-store sales growth (1)
5.6
%
 
6.7
%
Average per retail store per week:
 
 
 
Merchandise sales
$
29.7

 
$
32.2

Motor fuel gallons
28.2

 
29.8

Motor fuel gallons sold:
 
 
 
Retail
191,302

 
208,137

Wholesale
121,007

 
141,581

Average retail price of motor fuel per gallon
$
3.23

 
$
3.54

Motor fuel gross profit cents per gallon:
 
 
 
Retail

15.3
¢
 

13.3
¢
Wholesale

5.1
¢
 

5.0
¢
Retail credit card cents per gallon

5.1
¢
 

5.4
¢
 
 
 
 
 
(1)
We include a store in the same store sales base in its thirteenth full month of our operation.
(2)
We define EBITDA as net income (loss) 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 (loss) 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 debt agreements and indentures. EBITDA, Adjusted EBITDA and Adjusted EBITDAR are not presented in accordance with GAAP.
We believe EBITDA, Adjusted EBITDA and Adjusted EBITDAR are useful to investors in evaluating our operating performance because:
they are used as performance and liquidity measures under our existing revolving credit facility and the indenture governing our 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;
securities analysts and other interested parties use such calculations as a measure of financial performance and debt service capabilities;

18


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 (loss) 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 substitutes 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 (loss) attributable to Susser Holdings Corporation to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:
 
Three Months Ended
 
April 3,
2011

 
April 1,
2012

 
(in thousands)
Net loss attributable to Susser Holdings Corporation
$
(23
)
 
$
(528
)
Depreciation, amortization and accretion
10,902

 
12,563

Interest expense, net
9,937

 
10,327

Income tax expense (benefit)
750

 
(335
)
EBITDA
21,566

 
22,027

Non-cash stock-based compensation
888

 
1,172

Loss (gain) on disposal of assets and impairment charge
629

 
(293
)
Other miscellaneous expense
34

 
42

Adjusted EBITDA
23,117

 
22,948

Rent
11,316

 
11,772

Adjusted EBITDAR
$
34,433

 
$
34,720


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

19


 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
(in thousands)
Net cash provided by operating activities
$
20,834

 
$
30,562

Changes in operating assets & liabilities
(2,926
)
 
(17,166
)
Amortization of deferred financing fees/debt premium/discount, net
(809
)
 
(853
)
Gain (loss) on disposal of assets and impairment charge
(629
)
 
293

Non-cash stock-based compensation
(888
)
 
(1,172
)
Noncontrolling interest
(1
)
 
(2
)
Deferred income tax
(4,703
)
 
215

Excess tax benefits from stock-based compensation
1

 
158

Interest expense, net
9,937

 
10,327

Income tax expense (benefit)
750

 
(335
)
EBITDA
21,566

 
22,027

Non-cash stock-based compensation
888

 
1,172

Loss (gain) on disposal of assets and impairment charge
629

 
(293
)
Other miscellaneous
34

 
42

Adjusted EBITDA
23,117

 
22,948

     Rent
11,316

 
11,772

Adjusted EBITDAR
$
34,433

 
$
34,720

Refer to Note 13 of the accompanying Notes to Consolidated Financial Statements for a description of our segment reporting. The following table presents a reconciliation of our segment operating income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR:
 
Retail Segment
 
Wholesale Segment
 
All Other
 
Total
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
April 3,
2011
 
April 1,
2012
 
April 3,
2011
 
April 1,
2012
 
April 3,
2011
 
April 1,
2012
 
(in thousands)
Operating income (loss)
$
10,489

 
$
9,232

 
$
3,234

 
$
3,227

 
$
(3,024
)
 
$
(2,951
)
 
$
10,699

 
$
9,508

Depreciation, amortization and accretion
9,302

 
10,434

 
1,296

 
1,884

 
304

 
245

 
10,902

 
12,563

Other miscellaneous
 
 

 

 
 
 
(34
)
 
(42
)
 
(34
)
 
(42
)
Noncontrolling interest

 

 

 
 
 
(1
)
 
(2
)
 
(1
)
 
(2
)
EBITDA
19,791

 
19,666

 
4,530

 
5,111

 
(2,755
)
 
(2,750
)
 
21,566

 
22,027

Non-cash stock-based compensation

 

 

 
 
 
888

 
1,172

 
888

 
1,172

Loss (gain) on disposal of assets and impairment charge
582

 
(404
)
 
100

 
111

 
(53
)
 

 
629

 
(293
)
Other operating expenses

 

 

 
 
 
34

 
42

 
34

 
42

Adjusted EBITDA
20,373

 
19,262

 
4,630

 
5,222

 
(1,886
)
 
(1,536
)
 
23,117

 
22,948

Rent
10,488

 
10,980

 
1,090

 
1,060

 
(262
)
 
(268
)
 
11,316

 
11,772

Adjusted EBITDAR
$
30,861

 
$
30,242

 
$
5,720

 
$
6,282

 
$
(2,148
)
 
$
(1,804
)
 
$
34,433

 
$
34,720



First Quarter 2012 Compared to First Quarter 2011
The following discussion of results for first quarter 2012 compared to first quarter 2011 compares the 13-week period of operations ended April 1, 2012 to the 13-week period of operations ended April 3, 2011. During 2011, we constructed or acquired 19 stores, 18 of which opened after the first quarter of 2011 and therefore did not contribute to results in the first quarter of 2011. In addition, we have opened one store during the first quarter of 2012.
Total Revenue. Total revenue for first quarter 2012 was $1.4 billion, an increase of $245.3 million, or 21.0%, from 2011.

20


The increase in total revenue was driven by a 19.1% increase in retail fuel revenue, a 30.5% increase in wholesale fuel revenue and an increase in merchandise sales of 11.4%, as further discussed below.
Total Gross Profit. Total gross profit for first quarter 2012 was $123.0 million, an increase of $7.2 million, or 6.3% over 2011. The increase was primarily due to the increase in merchandise gross profit of $6.7 million, an increase in wholesale fuel gross profit of $0.9 million and $0.5 million of fuel transportation revenue to third parties, offset by a decrease in retail fuel gross profit of $1.6 million, as further discussed below. Included in these increases are the impact of new stores constructed or acquired during 2011 and 2012 ($5.4 million of growth in gross profit).
Merchandise Sales and Gross Profit. Merchandise sales were $226.1 million for first quarter 2012, a $23.1 million, or 11.4% increase over 2011. Our performance was due to a 6.7% merchandise same-store sales increase, accounting for $13.6 million of the increase, with the balance due to new stores built or acquired in 2011 and 2012. Merchandise same-store sales include food service sales but do not include motor fuel sales. Key categories contributing to the merchandise same-store sales increase were food service, beer, packaged drinks, snacks and candy. Food service includes sales from restaurant operations, hot dogs, fountain beverages, coffee and other foods prepared in the store.
Merchandise gross profit was $75.7 million for the first quarter of 2012, a 9.7% increase over 2011, which was driven by the increase in merchandise sales. Merchandise margin as a percent of sales declined slightly to 33.5% this quarter compared to 34.0% in the first quarter 2011 primarily attributable to a reduction in cigarette margin of over 280 basis points resulting from changes in manufacturer pricing programs initiated in the second quarter of 2011, and other manufacturers cost increases. Our reported merchandise margins do not include other income from services such as ATM’s, lottery, prepaid phone cards, car washes and movie rentals.
Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for first quarter 2012 were $736.4 million, an increase of $118.3 million, or 19.1% over 2011, primarily driven by a 9.5% increase in the average retail price of motor fuel and an 8.8% increase in retail gallons sold. We sold an average of approximately 30,000 gallons per retail store per week, 5.8% more than last year. Retail motor fuel gross profit decreased by $1.6 million or 5.4% over 2011 due to a decrease in the gross profit per gallon offset by the increase in gallons sold. The average retail fuel margin decreased from 15.3 cents per gallon to 13.3 cents per gallon for 2011 and 2012, respectively. This decrease in fuel margin decreased retail fuel gross profit by $4.2 million. After deducting credit card fees, the net margin decreased from 10.2 cents per gallon to 7.9 cents per gallon from first quarter 2011 to first quarter 2012.
Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues to third parties for the first quarter of 2012 were $438.8 million, a 30.5% increase over 2011. The increase was primarily driven by a 11.5% increase in the wholesale selling price per gallon and a 17.0% increase in gallons sold. Wholesale motor fuel gross profit of $7.1 million increased $0.9 million or 14.0% from 2011, due to additional gallons sold. The increase was partly offset by a 2.5% decrease in the gross profit per gallon from 5.1 to 5.0 cents per gallon (responsible for a $0.2 million decrease).
Other Revenue and Gross Profit. Other revenue of $13.1 million for first quarter 2012 increased by $1.5 million or 12.7% from 2011, with an 11.0% increase in associated gross profit, primarily attributable to growth in fuel transportation to third parties, ATM fees and lottery income.
Personnel Expense. Personnel expense consists primarily of retail store labor and overhead costs. For the first quarter of 2012, personnel expense increased $3.5 million or 9.1% over 2011. Of the increase in personnel expense, $2.3 million was attributable to the new stores acquired and constructed during 2011 and 2012. As a percentage of merchandise sales, personnel expense declined by 40 basis points to 18.5%.
General and Administrative Expenses. For first quarter 2012, general and administrative expenses increased by $1.3 million, or 13.1%, from 2011. G&A expenses include non-cash stock-based compensation expenses which were $1.2 million for the quarter, compared to $0.9 million for the first quarter of 2011, respectively. The remaining $1.0 million increase was primarily due to additional personnel and benefit costs, a portion of which are supporting our accelerated retail store growth program.
Other Operating Expenses. Other operating expenses increased by $2.5 million or 7.2% over 2011.  Operating expenses related to credit card fees, utilities and maintenance for new stores accounted for $1.4 million of increased costs. Significant changes to operating expenses are presented in the table below.



21


 
Three Months Ended
 
April 3,
2011
 
April 1,
2012
 
$ Change
 
% Change
Credit card expense
$
9,684

 
$
11,293

 
$
1,610

 
16.6
 %
Utilities
6,514

 
5,546

 
(968
)
 
(14.9
)%
Maintenance
6,338

 
6,252

 
(86
)
 
(1.4
)%
Supplies
2,306

 
2,887

 
581

 
25.2
 %
Other operating expenses
9,256

 
10,578

 
1,321

 
14.3
 %
Total other operating expenses
$
34,098

 
$
36,556

 
$
2,458

 
7.2
 %
Credit card expenses are directly tied to the cost of fuel. The Company has undertaken numerous initiatives to lower utility consumption but is also benefiting from lower prices for natural gas.
Rent Expense. Rent expense for first quarter 2012 of $11.8 million was $0.5 million or 4.0% higher than 2011 due primarily to rent expense on additional leased stores.
Gain/Loss on sale and disposal of assets and impairment charge. We recognized a net gain on sale and disposal of $0.3 million in the first quarter 2012 primarily related to asset sales, net of retirements.
Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expense for first quarter 2012 of $12.6 million was up $1.7 million, or 15.2%, from 2011 due to the additional assets in service.
Income from Operations. Income from operations for first quarter 2012 was $9.5 million, compared to $10.7 million for 2011. The decrease is primarily attributed to an increase in personnel and operating expenses and lower retail fuel gross profit of $1.6 million partly offset by higher wholesale fuel gross profit of $0.9 million and increased merchandise gross profit of $6.7 million, as described above.
Interest Expense, Net. Net interest expense for first quarter 2012 was $10.3 million, compared to $9.9 million for 2011. The increase is primarily attributable to $20.0 million additional mortgage debt as well as a $45,000 increase in non-cash interest expense, and a $93,000 reduction in interest income as further discussed in Note 9.
Income Tax. The income tax benefit accrued for first quarter 2012 was $0.3 million. In the first quarter of 2012, we began recording our interim provision for income taxes based on our estimated annual effective tax rate for the year. The income tax expense accrued for first quarter 2011 was $0.8 million, which consisted of $0.7 million of expense attributable to the Texas margin tax and $0.1 million of income tax expense related to federal and state income tax. See Note 10 of the accompanying Notes to Consolidated Financial Statements for further discussion of our income tax provision.
Net loss attributable to Susser Holdings Corporation. We recorded net loss attributable to Susser Holdings Corporation for the first quarter 2012 of $0.5 million, compared to net loss attributable to Susser Holdings Corporation of $23 thousand for 2011. The decrease is primarily due to the same factors impacting operating income, as described above.
Adjusted EBITDA. Adjusted EBITDA for first quarter 2012 was $22.9 million, a decrease of $0.2 million, or 0.7% compared to 2011. Retail segment Adjusted EBITDA of $19.3 million decreased by $1.1 million, or 5.5% compared to 2011, primarily due to lower fuel gross profit and increased personnel costs and credit card expense, offset by higher merchandise gross profit. Wholesale segment Adjusted EBITDA of $5.2 million increased by $0.6 million, or 12.8% from 2011, primarily resulting from the higher fuel gross profit. Other segment Adjusted EBITDA reflects net expenses of $1.5 million for the quarter, compared to net expenses of $1.9 million for the same period in 2011.
Liquidity and Capital Resources
Cash Flows from Operations. Cash flows from operations are our main source of liquidity. We rely primarily on cash provided by operating activities, supplemented as necessary from time to time by borrowings under our revolving credit facility, sale/leaseback transactions, and other financing transactions to finance our operations, to service our debt obligations and to fund our capital expenditures. Due to the seasonal nature of our business, our operating cash flow is typically the lowest during the first quarter of the year since (i) sales tend to be lower during the winter months; (ii) we are building inventory in preparation for spring break and summer; and (iii) we pay certain annual operating expenses during the first quarter. The summer months are our peak sales months, and therefore our operating cash flow tends to be the highest during the second and third quarters.

22


Cash flows from operations were $30.6 million and $20.8 million for the first three months of 2012 and 2011, respectively. The change in our cash provided from operating activities for the respective periods was primarily attributable to improved operating results and changes in working capital. Our daily working capital requirements fluctuate within each month, primarily in response to the timing of motor fuel tax, sales tax and rent payments. We had $128.3 million of cash and cash equivalents on hand at April 1, 2012 compared to $34.4 million at April 3, 2011, and $120.6 million at January 1, 2012.
Capital Expenditures. Capital expenditures, before any sale/leasebacks and asset dispositions were $24.0 million and $34.1 million during the first three months of 2012 and 2011, respectively. We opened one new large-format retail store and closed two smaller retail stores through April 1, 2012. We have opened three additional retail stores and closed one to date in the second quarter and currently have another 11 stores under construction. We expect to open 25 to 30 new retail stores in 2012.
Following is a summary of our recent operating site additions and closures by segment:
 
Three Months
Ended 
April 1, 2012
Retail stores:
 
Number at beginning of period
541

New stores
1

Closed stores
(2
)
Number at end of period
540

Wholesale dealer locations:
 
Number at beginning of period
565

New locations
7

Closed locations
(5
)
Number at end of period
567

During fiscal 2012, we plan to invest approximately $130 to $150 million in new retail stores, new dealer projects and acquisition of supply contracts, and maintenance and upgrade of our existing facilities. We plan to finance the majority of this year's capital spending plan with cash flows from operations, proceeds from our 2011 equity offering and cash balances. We may also use lease financing, long-term mortgage debt or borrowings under the revolving credit facility. We currently expect we will be able to access any required financing for our new store program.
Cash Flows from Financing Activities. The Company has a revolving credit facility (the “Revolver”) in an aggregate principal amount of up to $120 million. On May 7, 2010, the Company, through its subsidiaries Susser Holdings, L.L.C. and Susser Finance Corporation, issued $425 million 8.50% Senior Notes due 2016 (the “2016 Notes”). For more information regarding the terms of the Revolver, the 2016 Notes and other outstanding debt, please see Note 7 in the accompanying Notes to Consolidated Financial Statements. No additional financing was required during the first quarter of 2012.
At April 1, 2012, our outstanding debt was $454.8 million, excluding $3.6 million unamortized issuance discount. As of April 1, 2012, we had no outstanding borrowings under the revolving credit facility and $15.3 million in standby letters of credit. Our borrowing base in effect at April 1, 2012, allowed a maximum borrowing, including outstanding letters of credit, of $120.0 million. Our unused availability on the revolver at April 1, 2012 was $104.7 million. Our cash on our balance sheet was $128.3 million and total debt was $451.1 million, leaving debt net of cash of $322.8 million as of April 1, 2012.
Long Term Liquidity. We expect that our cash flows from operations, cash on hand, lease and mortgage financing and our revolving credit facility will be adequate to provide for our short-term and long-term liquidity needs. Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, as well as the cost of potential acquisitions and new store openings, will depend on our future performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we from time to time consider opportunities to repay, redeem or repurchase our existing indebtedness, and although we may refinance all or part of our indebtedness in the future, including our existing notes and our revolving credit and mortgage facility, there can be no assurances that we will do so. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to need to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Risk Factors” may also significantly impact our

23


liquidity.

Contractual Obligations and Commitments
Properties. Most of our leases are net leases requiring us to pay taxes, insurance and maintenance costs. We believe that no individual site is material to us. The following table summarizes the number of owned and leased properties:
 
As of
 
April 1, 2012
 
Fee
 
Leased
Operating sites:
 
 
 
Retail
252

 
288

Wholesale
51

 
31

Total
303

 
319

Office locations
4

 
3

Properties currently under construction
9

 
2

Properties held for future development
30

 

Income producing properties
8

 
6

Surplus properties
40

 

We lease our corporate and retail segment headquarters facility, which consists of approximately 83,000 square feet of office and warehouse space located in Corpus Christi. The annual lease expense is approximately $144,000 net of taxes, insurance and maintenance. We own the headquarters of our wholesale segment, which consists of approximately 43,000 square feet of office and warehouse space in Houston.


Quarterly Results of Operations and Seasonality
The following table sets forth certain unaudited financial and operating data for each of the last nine quarters. Each quarter consists of 13 weeks, unless noted otherwise. Our business is seasonal and we generally experience higher levels of revenues during the summer months than during the winter months.
 

24


 
 
2010
 
2011
 
2012
 
 
 
 
 
 
 
 
 
1st
QTR
 
2nd
QTR
 
3rd
QTR
 
4th
QTR
 
1st
QTR
 
2nd
QTR
 
3rd
QTR
 
4th
QTR
 
1st
QTR
Merchandise sales
$
191,038

 
$
208,276

 
$
207,018

 
$
199,920

 
$
203,017

 
$
226,441

 
$
233,464

 
$
218,989

 
$
226,070

Motor fuel sales:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
478,619

 
511,646

 
489,130

 
507,677

 
618,120

 
724,993

 
711,203

 
660,963

 
736,405

Wholesale
258,195

 
287,524

 
260,066

 
288,494

 
336,361

 
412,069

 
397,201

 
403,512

 
438,801

Other income
10,273

 
11,093

 
10,203

 
11,458

 
11,635

 
12,885

 
11,646

 
11,669

 
13,111

Total revenue
938,125

 
1,018,539

 
966,417

 
1,007,549

 
1,169,133

 
1,376,388

 
1,353,514

 
1,295,133

 
1,414,387

Merchandise gross profit
62,383

 
70,673

 
70,050

 
67,577

 
69,011

 
77,094

 
78,391

 
73,105

 
75,727

Motor fuel gross profit:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
20,291

 
45,863

 
42,133

 
27,324

 
29,313

 
60,719

 
55,306

 
37,183

 
27,725

Wholesale
5,028

 
7,499

 
7,248

 
6,243

 
6,207

 
9,023

 
8,410

 
7,402

 
7,078

Other gross profit
9,919

 
9,867

 
9,946

 
11,058

 
11,188

 
12,094

 
11,308

 
11,232

 
12,422

Total gross profit
97,621

 
133,902

 
129,377

 
112,202

 
115,719

 
158,930

 
153,415

 
128,922

 
122,952

Income from operations
1,692

 
31,912

 
26,571

 
9,821

 
10,699

 
47,660

 
37,586

 
18,945

 
9,508

Net income (loss)
attributable to
Susser Holdings Corporation
$
(4,985
)
 
$
(1,916
)
 
$
8,952

 
$
(1,265
)
 
$
(23
)
 
$
23,665

 
$
18,516

 
$
5,299

 
$
(528
)
Earnings (loss) per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic
$
(0.29
)
 
$
(0.11
)
 
$
0.53

 
$
(0.07
)
 
$
0.00

 
$
1.38

 
$
1.09

 
$
0.29

 
$
(0.03
)
Diluted
$
(0.29
)
 
$
(0.11
)
 
$
0.52

 
$
(0.07
)
 
$
0.00

 
$
1.36

 
$
1.06

 
$
0.29

 
$
(0.03
)
Merchandise margin, net
32.7
%
 
33.9
%
 
33.8
%
 
33.8
%
 
34.0
%
 
34.0
%
 
33.6
%
 
33.4
%
 
33.5
%
Fuel gallons:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail
183,068

 
185,192

 
185,073

 
182,430

 
191,302

 
194,538

 
199,650

 
200,092

 
208,137

Wholesale
120,013

 
128,829

 
122,115

 
123,252

 
121,007

 
128,070

 
129,950

 
143,805

 
141,581

Motor fuel margin:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail (a)

11.1
¢
 

24.8
¢
 

22.8
¢
 

15.0
¢
 

15.3
¢
 

31.2
¢
 

27.7
¢
 

18.6
¢
 

13.3
¢
Wholesale

4.2
¢
 

5.8
¢
 

5.9
¢
 

5.1
¢
 

5.1
¢
 

7.0
¢
 

6.5
¢
 

5.1
¢
 

5.0
¢
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Before deducting credit card, fuel maintenance and other fuel related expenses.

Summary of Significant Accounting Policies
We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results of operations, and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended January 1, 2012. As discussed in Note 2 to our Consolidated Financial Statements included elsewhere in this report, certain new financial accounting pronouncements have been issued which either have already been reflected in the accompanying consolidated financial statements, or will become effective for our financial statements at various dates in the future.
As one of our critical accounting policies, goodwill is not being amortized, but is tested annually for impairment or more frequently if events and circumstances indicate that the asset might be impaired. There are no indicators of impairment as of April 1, 2012.



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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We currently have a $120.0 million revolving credit facility which bears interest at variable rates, but which had no outstanding borrowings at April 1, 2012. We had $28.2 million outstanding in other notes payable that is subject to variable interest rates. The annualized effect of a one percentage point change in floating interest rates on our variable rate debt obligations outstanding at April 1, 2012, would be to change interest expense by approximately $0.3 million.
Our primary exposure relates to:
Interest rate risk on short-term borrowings and
The impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.
We manage interest rate risk on our outstanding long-term and short-term debt through the use of fixed and variable rate debt. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.
From time to time, we enter into interest rate swaps to either reduce the impact of changes in interest rates on our floating rate long-term debt or to take advantage of favorable variable interest rates compared to our fixed rate long-term debt.
We also periodically purchase motor fuel in bulk and hold in inventory or transport it to West Texas or Houston via pipeline. We hedge this inventory risk through the use of fuel futures contracts which are matched in quantity and timing to the anticipated usage of the inventory. These fuel hedging positions have not been material to our operations. We had 16 positions with a fair value of ($12,800) outstanding at January 1, 2012 and 95 positions with a fair value of ($140,700) outstanding at April 1, 2012.
For more information on our hedging activity, please see Note 7 in the accompanying Notes to Consolidated Financial Statements.
 
Item 4. Controls and Procedures

As required by paragraph (b) of Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we make changes to our internal control over financial reporting that are intended to enhance its effectiveness and which do not have a material effect on our overall internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate.


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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are parties to various legal actions in the ordinary course of our business. We believe these actions are routine in nature and incidental to the operation of our business. While the outcome of these actions cannot be predicted with certainty, we believe that the ultimate resolutions of these matters will not have a material adverse effect on our business, financial condition or prospects.
 
Item 1A. Risk Factors

You should carefully consider the risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended January 1, 2012, as well as the section within this report entitled “Forward-Looking Statements” under Part I. Financial Information – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, before making any investment decision with respect to our securities. The risks and uncertainties described in our annual report are not the only ones facing us. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, could negatively impact our results of operations or financial condition in the future. If any of such risks actually occur, our business, financial condition or results of operations could be materially adversely affected.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.
 
Item 4. Mine Safety Disclosures

Not applicable.
 
Item 5. Other Information

None.
 
Item 6. Exhibits

The list of exhibits attached to this Quarterly Report on Form 10-Q is incorporated herein by reference.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
SUSSER HOLDINGS CORPORATION
Date: May 11, 2012
By
/s/ Mary E. Sullivan
 
 
Mary E. Sullivan
 
 
Executive Vice President and Chief Financial Officer
(On behalf of the registrant, and in her capacity as
principal financial officer and principal accounting officer)


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EXHIBIT INDEX
 
Exhibit No.
 
Description
31.1
 
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
 
 
 
31.2
 
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
 
 
 
32.1
 
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.
 
 
 
32.2
 
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.
 
 
 
101
 
Interactive Data Files.


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