SUSS » Topics » Nine Months Ended October 1, 2006 Compared to Nine Months ended October 2, 2005

This excerpt taken from the SUSS 10-K filed Feb 17, 2009.

Fiscal 2006 Compared to Fiscal 2005

The following comparative discussion of results for fiscal 2005 includes both the 352-day period of operations by Susser Holdings, L.L.C. as predecessor company, and the 12-day period of operations by Stripes Holdings LLC, following the 2005 Transactions and holding company reorganization of Susser Holdings, L.L.C. The 2005 Transactions did not impact our core retail or wholesale operations, and therefore our 2006 operating results are comparable to 2005, unless otherwise noted.

Total Revenue. Total revenue for fiscal 2006 was $2,265.2 million, an increase of $368.9 million, or 19.5%, over 2005. The increase in total revenue was driven by a 16.2% increase in the average sales price of motor fuel, a 10.9% increase in merchandise sales and a 4.5% increase in motor fuel gallons sold.

Total Gross Profit. Total gross profit for 2006 was $220.8 million, an increase of $19.2 million, or 9.5%, over 2005. The increase was primarily attributable to increases in merchandise sales, motor fuel volumes and motor fuel margins.

Merchandise Sales and Gross Profit. Merchandise sales were $365.3 million for 2006, a $35.8 million, or 10.9%, increase over 2005. Our performance was due to a 6.1% merchandise same store sales increase, including our strong Laredo Taco Company restaurant sales, and the addition of 16 new retail stores. Key categories contributing to the same store sales increase were food service ($7.9 million), packaged beverages ($5.2 million) and beer ($4.3 million). Merchandise gross profit was $119.1 million for 2006, a $12.6 million, or 11.9%, increase over 2005, which was driven primarily by the increase in merchandise sales. Merchandise margins were 32.6%, up slightly from 32.3% in 2005. Merchandise margin improvements due to a more favorable product mix emphasizing Laredo Taco Company and dispensed and packaged beverages were partially offset by declines in cigarette margins.

 

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Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for 2006 were $953.0 million, an increase of 22.1% over 2005, driven by a 13.6% increase in the average retail price of motor fuel and a 7.4% increase in retail gallons sold. The increase in gallons is attributable to a 4.8% increase in average gallons per site and the opening of 16 new retail stores. Retail motor fuel gross profit increased by 8.0% over 2005, due to the increased gallons and a slight increase in the gross profit per gallon. Gross profit cents per gallon of 13.6 cents was 0.5% higher than in 2005.

Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues for 2006 were $923.6 million, a 20.8% increase over 2005. This increase is attributable to an 18.2% increase in average wholesale motor fuel prices and a 2.1% increase in gallons sold. As previously discussed, we sold our unattended fueling sites in June, 2006, however we continued to supply unbranded fuel to some of those sites. Wholesale motor fuel gross profit of $25.0 million increased 3.0% over 2005 as gross profit cents per gallon increased to 5.6 cents for 2006 compared to 5.5 cents for 2005. The slight increase in gross profit cents per gallon was related to our supply sites and unbranded motor fuel sales.

Service and Other Revenue and Other Gross Profit. Other revenue of $23.2 million for 2006 was up 7.6% over 2005. Gross profit associated with other revenue was $22.8 million, up 8.8% over 2005. The increase over last year was partially driven by an increase in income from our ATM services, prepaid products and from our 16 new retail stores.

Personnel Expense. The largest component of our operating expenses is retail store personnel expense. For 2006, personnel expense was $69.3 million, an increase of $7.1 million, or 11.3%, over 2005. The increase is primarily attributable to stores opened in 2005 and 2006 ($4.7 million), which all have restaurants requiring incremental labor. Additionally, our restaurant sales in all stores, which require more labor, are growing much faster than our other merchandise sales and therefore are contributing to the increase in personnel expense ($1.1 million). We also had an increase in division support ($0.5 million), store staff training ($0.4 million) and benefits ($0.4 million).

General and Administrative Expense. General and administrative expense was $19.4 million in 2006, a decrease of $17.2 million, or 47.1%, from 2005. Included in G&A expense are non-cash stock compensation charges of $0.8 million for 2006 and $1.2 million for 2005. Additionally, a $17.3 million compensation charge was recognized in 2005 for the redemption of management options in connection with the 2005 Transactions. In 2006, expenses relating to compliance with the Sarbanes Oxley Act of 2002 and other expenses as a result of becoming a public company, were approximately $0.5 million.

Operating Expenses. Operating expenses were $62.0 million in 2006, an increase of $8.4 million, or 15.6%, over 2005. The increase was largely driven by increased credit card fees ($3.2 million) from the increase in the average retail price of motor fuel and utility expense from higher energy costs ($1.5 million). The remaining increase is primarily related to our new stores.

Rent Expense. Rent expense of $22.7 million increased by $13.0 million, or 133.0%, over 2005, due to the sale/leaseback of $170.0 million of properties in December 2005. Included in rent expense is a non-cash charge for straight-line rent of $1.6 million and a credit of $1.5 million for amortization of deferred gains from the 2005 sale leaseback, with cash rent expense at $22.6 million.

Royalty Expense. Royalty expense for the use of the Circle K trade name was $3.6 million in 2006, an increase of $0.2 million, or 5.2%, over 2005. We completed the rebranding of our stores to the Stripes brand during the first quarter of 2007, thus eliminating this royalty in future periods. To support our proprietary Stripes brand, we increased our annual marketing expense by approximately $0.8 million during 2006.

Loss (Gain) on Disposal of Assets and Impairment Charges. During 2006 we sold assets with a net book value of $4.8 million and recognized no gain or loss on disposition of these assets since this was within the one

 

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year look-back period from the valuation related to the 2005 Transactions. In accordance with purchase accounting, the book value of assets disposed of within one year of the event were adjusted so no gain or loss was recognized on the sale.

Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expense of $22.8 million decreased by $3.8 million, or 14.4%, from 2005 primarily due to the elimination of depreciation expense on the assets sold in the December 2005 sale leaseback transaction. Partially offsetting this decrease is depreciation and amortization related to the step-up in basis attributable to the purchase accounting treatment of the 2005 Transactions. Amortization expense related to loan fees including $1.8 million and $3.3 million write-offs of unamortized loan costs related to debt repayments in 2006 and 2005, respectively, have been reclassified to interest expense.

Income from Operations. Income from operations for 2006 was $18.5 million, compared to $6.4 million for 2005. The $12.1 million, or 188.2%, increase was primarily attributable to the $17.3 million compensation expense recognized for redemption of management options during 2005. Other changes impacting income from operations are described above.

Interest Expense, Net. Net interest expense for 2006 was $25.2 million, an increase of $3.5 million from 2005. Included in interest expense was $5.3 million in debt prepayment penalties in 2006, compared to $2.9 million in 2005. We paid off $50.0 million of our existing notes in November 2006 with proceeds from the IPO. Also included is the amortization of loan fees of $2.6 million and $3.6 million in 2006 and 2005, respectively.

Other Miscellaneous Income and Expense. Other miscellaneous includes income from a non-consolidated joint venture and other non-operating income. We recorded $9.8 million in non-recurring charges in 2005 in connection with the 2005 Transactions, net of $1.4 million in miscellaneous income related to the exercise of warrants that we had received in connection with the 2002 sale of our Fleet Card operations.

Income Taxes. In connection with the closing of the reorganization and IPO, we converted from a limited liability company to a “C” corporation and established beginning balances in its deferred tax assets and liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes (“SFAS No. 109”). Accordingly, we recorded a cumulative net deferred tax asset of less than $0.1 million on that date, which consists of a $7.4 million tax benefit recognized upon change of entity status and $2.3 million tax benefit related to operations after the IPO, net of a valuation allowance of $9.7 million. We considered our historical taxable income and estimates of future taxable income in making a determination of a reasonable valuation allowance. We will evaluate this allowance in the future if new circumstances indicate that the realization of a greater portion or the full deferred tax assets is more likely than not.

Net Income or Loss. We recorded a net loss for 2006 of $3.7 million, compared to a net loss of $20.6 million for 2005. The loss in 2005 is primarily due to $33.4 million of one-time charges related to the 2005 Transactions, and the 2006 loss is primarily due to the $7.1 million of 2006 debt repayment charges and the other income and expense items discussed above.

Adjusted EBITDA. Adjusted EBITDA for 2006 was $45.2 million, a decrease of $9.2 million, or 16.9%, compared to 2005. Retail segment Adjusted EBITDA of $25.8 million decreased by $14.5 million, or 36.0%, over 2005 due to the differences in gross profit, SG&A, and rent expense as described above. Wholesale segment Adjusted EBITDA of $19.6 million increased by $2.4 million, or 13.7%, over 2005 primarily due to the increased motor fuel gross profit.

This excerpt taken from the SUSS 10-K filed Mar 14, 2008.

Fiscal 2006 Compared to Fiscal 2005

The following comparative discussion of results for fiscal 2005 includes both the 352-day period of operations by Susser Holdings, L.L.C. as predecessor company, and the 12-day period of operations by Stripes Holdings LLC, following the 2005 Transactions and holding company reorganization of Susser Holdings, L.L.C. The 2005 Transactions did not impact our core retail or wholesale operations, and therefore our 2006 operating results are comparable to 2005, unless otherwise noted.

Total Revenue. Total revenue for fiscal 2006 was $2,265.2 million, an increase of $368.9 million, or 19.5%, over 2005. The increase in total revenue was driven by a 16.2% increase in the average sales price of motor fuel, a 10.9% increase in merchandise sales and a 4.5% increase in motor fuel gallons sold.

Total Gross Profit. Total gross profit for 2006 was $220.8 million, an increase of $19.2 million, or 9.5%, over 2005. The increase was primarily attributable to increases in merchandise sales, motor fuel volumes and motor fuel margins.

Merchandise Sales and Gross Profit. Merchandise sales were $365.3 million for 2006, a $35.8 million, or 10.9%, increase over 2005. Our performance was due to a 6.1% merchandise same store sales increase, including our strong Laredo Taco Company restaurant sales, and the addition of 16 new retail stores. Key categories contributing to the same store sales increase were food service ($7.9 million), packaged beverages ($5.2 million) and beer ($4.3 million). Merchandise gross profit was $119.1 million for 2006, a $12.6 million, or 11.9%, increase over 2005, which was driven primarily by the increase in merchandise sales. Merchandise margins were 32.6%, up slightly from 32.3% in 2005. Merchandise margin improvements due to a more favorable product mix emphasizing Laredo Taco Company and dispensed and packaged beverages were partially offset by declines in cigarette margins.

 

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Index to Financial Statements

Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for 2006 were $953.0 million, an increase of 22.1% over 2005, driven by a 13.6% increase in the average retail price of motor fuel and a 7.4% increase in retail gallons sold. The increase in gallons is attributable to a 4.8% increase in average gallons per site and the opening of 16 new retail stores. Retail motor fuel gross profit increased by 8.0% over 2005, due to the increased gallons and a slight increase in the gross profit per gallon. Gross profit cents per gallon of 13.6 cents was 0.5% higher than in 2005.

Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues for 2006 were $923.6 million, a 20.8% increase over 2005. This increase is attributable to an 18.2% increase in average wholesale motor fuel prices and a 2.1% increase in gallons sold. As previously discussed, we sold our unattended fueling sites in June, 2006, however we continued to supply unbranded fuel to some of those sites. Wholesale motor fuel gross profit of $25.0 million increased 3.0% over 2005 as gross profit cents per gallon increased to 5.6 cents for 2006 compared to 5.5 cents for 2005. The slight increase in gross profit cents per gallon was related to our supply sites and unbranded motor fuel sales.

Service and Other Revenue and Other Gross Profit. Other revenue of $23.2 million for 2006 was up 7.6% over 2005. Gross profit associated with other revenue was $22.8 million, up 8.8% over 2005. The increase over last year was partially driven by an increase in income from our ATM services, prepaid products and from our 16 new retail stores.

Personnel Expense. The largest component of our operating expenses is retail store personnel expense. For 2006, personnel expense was $69.3 million, an increase of $7.1 million, or 11.3%, over 2005. The increase is primarily attributable to stores opened in 2005 and 2006 ($4.7 million), which all have restaurants requiring incremental labor. Additionally, our restaurant sales in all stores, which require more labor, are growing much faster than our other merchandise sales and therefore are contributing to the increase in personnel expense ($1.1 million). We also had an increase in division support ($0.5 million), store staff training ($0.4 million) and benefits ($0.4 million).

General and Administrative Expense. General and administrative expense was $19.4 million in 2006, a decrease of $17.2 million, or 47.1%, from 2005. Included in G&A expense are non-cash stock compensation charges of $0.8 million for 2006 and $1.2 million for 2005. Additionally, a $17.3 million compensation charge was recognized in 2005 for the redemption of management options in connection with the 2005 Transactions. In 2006, expenses relating to compliance with the Sarbanes Oxley Act of 2002 and other expenses as a result of becoming a public company, were approximately $0.5 million.

Operating Expenses. Operating expenses were $62.0 million in 2006, an increase of $8.4 million, or 15.6%, over 2005. The increase was largely driven by increased credit card fees ($3.2 million) from the increase in the average retail price of motor fuel and utility expense from higher energy costs ($1.5 million). The remaining increase is primarily related to our new stores.

Rent Expense. Rent expense of $22.7 million increased by $13.0 million, or 133.0%, over 2005, due to the sale/leaseback of $170.0 million of properties in December 2005. Included in rent expense is a non-cash charge for straight-line rent of $1.6 million and a credit of $1.5 million for amortization of deferred gains from the 2005 sale leaseback, with cash rent expense at $22.6 million.

Royalty Expense. Royalty expense for the use of the Circle K trade name was $3.6 million in 2006, an increase of $0.2 million, or 5.2%, over 2005. We completed the rebranding of our stores to the Stripes brand during the first quarter of 2007, thus eliminating this royalty in future periods. To support our proprietary Stripes brand, we increased our annual marketing expense by approximately $0.8 million during 2006.

Loss (Gain) on Disposal of Assets and Impairment Charges. During 2006 we sold assets with a net book value of $4.8 million and recognized no gain or loss on disposition of these assets since this was within the one

 

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Index to Financial Statements

year look-back period from the valuation related to the 2005 Transactions. In accordance with purchase accounting, the book value of assets disposed of within one year of the event were adjusted so no gain or loss was recognized on the sale.

Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expense of $22.8 million decreased by $3.8 million, or 14.4%, from 2005 primarily due to the elimination of depreciation expense on the assets sold in the December 2005 sale leaseback transaction. Partially offsetting this decrease is depreciation and amortization related to the step-up in basis attributable to the purchase accounting treatment of the 2005 Transactions. Amortization expense related to loan fees including $1.8 million and $3.3 million write-offs of unamortized loan costs related to debt repayments in 2006 and 2005, respectively, have been reclassified to interest expense.

Income from Operations. Income from operations for 2006 was $18.5 million, compared to $6.4 million for 2005. The $12.1 million, or 188.2%, increase was primarily attributable to the $17.3 million compensation expense recognized for redemption of management options during 2005. Other changes impacting income from operations are described above.

Interest Expense, Net. Net interest expense for 2006 was $25.2 million, an increase of $3.5 million from 2005. Included in interest expense was $5.3 million in debt prepayment penalties in 2006, compared to $2.9 million in 2005. We paid off $50.0 million of our existing notes in November 2006 with proceeds from the IPO. Also included is the amortization of loan fees of $2.6 million and $3.6 million in 2006 and 2005, respectively.

Other Miscellaneous Income and Expense. Other miscellaneous includes income from a non-consolidated joint venture and other non-operating income. We recorded $9.8 million in non-recurring charges in 2005 in connection with the 2005 Transactions, net of $1.4 million in miscellaneous income related to the exercise of warrants that we had received in connection with the 2002 sale of our Fleet Card operations.

Income Taxes. In connection with the closing of the reorganization and IPO, we converted from a limited liability company to a “C” corporation and established beginning balances in its deferred tax assets and liabilities in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes (“SFAS No. 109”). Accordingly, we recorded a cumulative net deferred tax asset of less than $0.1 million on that date, which consists of a $7.4 million tax benefit recognized upon change of entity status and $2.3 million tax benefit related to operations after the IPO, net of a valuation allowance of $9.7 million. We considered our historical taxable income and estimates of future taxable income in making a determination of a reasonable valuation allowance. We will evaluate this allowance in the future if new circumstances indicate that the realization of a greater portion or the full deferred tax assets is more likely than not.

Net Income or Loss. We recorded a net loss for 2006 of $3.7 million, compared to a net loss of $20.6 million for 2005. The loss in 2005 is primarily due to $33.4 million of one-time charges related to the 2005 Transactions, and the 2006 loss is primarily due to the $7.1 million of 2006 debt repayment charges and the other income and expense items discussed above.

Adjusted EBITDA. Adjusted EBITDA for 2006 was $45.2 million, a decrease of $9.2 million, or 16.9%, compared to 2005. Retail segment Adjusted EBITDA of $25.8 million decreased by $14.5 million, or 36.0%, over 2005 due to the differences in gross profit, SG&A, and rent expense as described above. Wholesale segment Adjusted EBITDA of $19.6 million increased by $2.4 million, or 13.7%, over 2005 primarily due to the increased motor fuel gross profit.

This excerpt taken from the SUSS 8-K filed Oct 29, 2007.

Fiscal 2006 Compared to Fiscal 2005

The following discussion of results for fiscal 2006 compared to fiscal 2005 compares the results of operations for the 53 weeks ended November 4, 2006 to the 52 weeks ended October 29, 2005.

Total Revenue. Total revenue for fiscal 2006 was $755.5 million, an increase of $155.3 million, or 25.9%, over fiscal 2005. The increase in total revenue was driven by a 16.2% increase in the average sales price of motor fuel, an 11.6% increase in merchandise sales and a 13.9% increase in motor fuel gallons sold. Approximately $12.2 million of 2006 revenue can be attributed to the 53rd week in 2006.

Total Gross Profit. Total gross profit for fiscal 2006 was $114.0 million, an increase of $14.0 million, or 14.0%, over fiscal 2005. The increase was primarily attributable to increases in merchandise sales and motor fuel volumes. Approximately $1.8 million of 2006 gross profit can be attributed to the 53rd week.

Merchandise Sales and Gross Profit. Merchandise sales were $208.7 million for fiscal 2006, a $21.6 million, or 11.6%, increase over fiscal 2005. The increase was due to a 7.7% merchandise same store sales increase, as well as the addition of three newly-constructed and 14 acquired retail stores (11 of which were acquired in September 2006). Merchandise gross profit was $71.9 million for fiscal 2006, a $7.6 million, or 11.8%, increase over 2005. This increase was primarily due to the increase in merchandise sales. Merchandise gross profit margins were 34.5%, up slightly from 34.4% in 2005.

Motor Fuel Sales, Gallons and Gross Profit. Motor fuel sales in fiscal 2006 were $540.7 million, an increase of $132.1 million, or 32.3%, over fiscal 2005. This increase was driven by a 16.2% increase in the average retail price of motor fuel and a 13.9% increase in retail gallons sold. The increase in retail gallons sold is attributable to a 12.3% increase in average gallons sold per site the opening of three new stores and the acquisition of 14 stores. The impact of the 53rd week on motor fuel sales was approximately $8.5 million. Motor fuel gross profit increased by 15.6% over 2005, due to the increase in gallons sold and a slight increase in gross profit per gallon. Fiscal 2006 gross profit cents per gallon of 16.2 cents was 2.4% higher than in 2005. The wholesale business acquired in September 2006 accounted for $1.0 million in motor fuel sales, and $0.1 million in gross profit in fiscal 2006.

Other Revenue and Gross Profit. Other revenue and gross profit was $6.0 million in fiscal 2006, an increase of $1.6 million, or 34.8%, over fiscal 2005. The increase was primarily driven by the additional retail stores, and an increase in income from a new ATM program as well as improved car wash operations.

Personnel Expense. Personnel expense was $34.3 million in fiscal 2006, an increase of $2.9 million, or 9.4%, over fiscal 2005. The increase was primarily attributable to the additional retail stores in 2006.

General and Administrative Expense. General and administrative expense was $8.6 million in fiscal 2006, an increase of $1.0 million, or 12.8%, over fiscal 2005. The increase was primarily due to additional personnel to support store growth.

Operating Expenses. Operating expenses were $30.6 million in fiscal 2006, an increase of $3.2 million, or 11.7%, over fiscal 2005. The increase was largely driven by the additional retail stores. Credit card fees and utility expenses realized the largest year-over-year increases.

 

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Depreciation and Amortization. Depreciation and amortization expense was $10.1 million in fiscal 2006, an increase of $0.9 million, or 9.8%, over fiscal 2005. This increase was primarily due to the additional retail stores.

Income from Operations. Income from operations for fiscal 2006 was $29.1 million, an increase of $5.4 million, or 22.9%, over fiscal 2005. The increase was primarily attributable to the increases in merchandise and motor fuel sales discussed above, partly offset by higher personnel and operating expenses associated with the additional stores.

Income Taxes. Income tax expense for fiscal 2006 was $6.1 million, an increase of $2.0 million, or 50.3%, over fiscal 2005. The increase was primarily related to the increase in operating income discussed above.

Net Income. Net income for fiscal 2006 was $9.9 million, an increase of $3.6 million, or 56.2%, over fiscal 2005. The increase was due to the increase in operating income as discussed above, partially offset by additional income tax expense.

Adjusted EBITDA. Adjusted EBITDA for fiscal 2006 was $39.3 million, an increase of $6.8 million, or 21.1%, compared to fiscal 2005. The increase is primarily attributable to increased merchandise and motor fuel sales, partially offset by additional personnel and operating expenses.

This excerpt taken from the SUSS 8-K filed Oct 29, 2007.

Fiscal 2006 Compared to Fiscal 2005

The following discussion of results for fiscal 2006 compared to fiscal 2005 compares the results of operations for the 53 weeks ended November 4, 2006 to the 52 weeks ended October 29, 2005.

Total Revenue. Total revenue for fiscal 2006 was $755.5 million, an increase of $155.3 million, or 25.9%, over fiscal 2005. The increase in total revenue was driven by a 16.2% increase in the average sales price of motor fuel, an 11.6% increase in merchandise sales and a 13.9% increase in motor fuel gallons sold. Approximately $12.2 million of 2006 revenue can be attributed to the 53rd week in 2006.

Total Gross Profit. Total gross profit for fiscal 2006 was $114.0 million, an increase of $14.0 million, or 14.0%, over fiscal 2005. The increase was primarily attributable to increases in merchandise sales and motor fuel volumes. Approximately $1.8 million of 2006 gross profit can be attributed to the 53rd week.

Merchandise Sales and Gross Profit. Merchandise sales were $208.7 million for fiscal 2006, a $21.6 million, or 11.6%, increase over fiscal 2005. The increase was due to a 7.7% merchandise same store sales increase, as well as the addition of three newly-constructed and 14 acquired retail stores (11 of which were acquired in September 2006). Merchandise gross profit was $71.9 million for fiscal 2006, a $7.6 million, or 11.8%, increase over 2005. This increase was primarily due to the increase in merchandise sales. Merchandise gross profit margins were 34.5%, up slightly from 34.4% in 2005.

Motor Fuel Sales, Gallons and Gross Profit. Motor fuel sales in fiscal 2006 were $540.7 million, an increase of $132.1 million, or 32.3%, over fiscal 2005. This increase was driven by a 16.2% increase in the average retail price of motor fuel and a 13.9% increase in retail gallons sold. The increase in retail gallons sold is attributable to a 12.3% increase in average gallons sold per site the opening of three new stores and the acquisition of 14 stores. The impact of the 53rd week on motor fuel sales was approximately $8.5 million. Motor fuel gross profit increased by 15.6% over 2005, due to the increase in gallons sold and a slight increase in gross profit per gallon. Fiscal 2006 gross profit cents per gallon of 16.2 cents was 2.4% higher than in 2005. The wholesale business acquired in September 2006 accounted for $1.0 million in motor fuel sales, and $0.1 million in gross profit in fiscal 2006.

Other Revenue and Gross Profit. Other revenue and gross profit was $6.0 million in fiscal 2006, an increase of $1.6 million, or 34.8%, over fiscal 2005. The increase was primarily driven by the additional retail stores, and an increase in income from a new ATM program as well as improved car wash operations.

Personnel Expense. Personnel expense was $34.3 million in fiscal 2006, an increase of $2.9 million, or 9.4%, over fiscal 2005. The increase was primarily attributable to the additional retail stores in 2006.

General and Administrative Expense. General and administrative expense was $8.6 million in fiscal 2006, an increase of $1.0 million, or 12.8%, over fiscal 2005. The increase was primarily due to additional personnel to support store growth.

Operating Expenses. Operating expenses were $30.6 million in fiscal 2006, an increase of $3.2 million, or 11.7%, over fiscal 2005. The increase was largely driven by the additional retail stores. Credit card fees and utility expenses realized the largest year-over-year increases.

 

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Depreciation and Amortization. Depreciation and amortization expense was $10.1 million in fiscal 2006, an increase of $0.9 million, or 9.8%, over fiscal 2005. This increase was primarily due to the additional retail stores.

Income from Operations. Income from operations for fiscal 2006 was $29.1 million, an increase of $5.4 million, or 22.9%, over fiscal 2005. The increase was primarily attributable to the increases in merchandise and motor fuel sales discussed above, partly offset by higher personnel and operating expenses associated with the additional stores.

Income Taxes. Income tax expense for fiscal 2006 was $6.1 million, an increase of $2.0 million, or 50.3%, over fiscal 2005. The increase was primarily related to the increase in operating income discussed above.

Net Income. Net income for fiscal 2006 was $9.9 million, an increase of $3.6 million, or 56.2%, over fiscal 2005. The increase was due to the increase in operating income as discussed above, partially offset by additional income tax expense.

Adjusted EBITDA. Adjusted EBITDA for fiscal 2006 was $39.3 million, an increase of $6.8 million, or 21.1%, compared to fiscal 2005. The increase is primarily attributable to increased merchandise and motor fuel sales, partially offset by additional personnel and operating expenses.

This excerpt taken from the SUSS 10-K filed Apr 2, 2007.

Fiscal 2006 Compared to Fiscal 2005

The following comparative discussion of results for fiscal 2005 includes both the 352-day period of operations by Susser Holdings, L.L.C. as predecessor company, and the 12-day period of operations by Stripes Holdings LLC, following the December 2005 recapitalization and holding company reorganization of Susser Holdings, L.L.C. (the “2005 Transaction”). The 2005 Transaction did not impact our core retail or wholesale operations, and therefore our 2006 operating results are comparable to 2005, unless otherwise noted.

Total Revenue. Total revenue for the 2006 was $2,265.2 million, an increase of $368.9 million, or 19.5%, over 2005. The increase in total revenue was driven by a 16.2% increase in the average sales price of motor fuel, a 10.9% increase in merchandise sales and a 4.5% increase in motor fuel gallons sold.

Total Gross Profit. Total gross profit for 2006 was $220.8 million, an increase of $19.2 million, or 9.5%, over 2005. The increase was primarily attributable to increases in merchandise sales, motor fuel volumes and motor fuel margins.

Merchandise Sales and Gross Profit. Merchandise sales were $365.3 million for 2006, a $35.8 million, or 10.9%, increase over 2005. Our performance was due to a 6.1% merchandise same store sales increase, including our strong Laredo Taco Company restaurant sales, and the addition of 16 new retail stores. Key categories contributing to the same store sales increase were Laredo Taco Company restaurant sales ($6.4 million), packaged beverages ($5.2 million) and beer ($4.3 million). Merchandise gross profit was $119.1 million for 2006, a $12.6 million, or 11.9%, increase over 2005, which was driven primarily by the increase in merchandise sales. Merchandise margins were 32.6%, up slightly from 32.3% in 2005. Merchandise margin improvements due to a more favorable product mix emphasizing Laredo Taco Company and dispensed and packaged beverages were partially offset by declines in cigarette margins.

Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for 2006 were $953.0 million, an increase of 22.1% over 2005, driven by a 13.6% increase in the average retail price of motor fuel and a 7.4% increase in retail gallons sold. The increase in gallons is attributable to a 4.8% increase in average gallons per site and the opening of 16 new retail stores. Retail motor fuel gross profit increased by 8.0% over 2005, due to the increased gallons and a slight increase in the gross profit per gallon. Gross profit cents per gallon of 13.6 cents was 0.5% higher than in 2005.

Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues for 2006 were $923.6 million, a 20.8% increase over 2005. This increase is attributable to an 18.2% increase in average wholesale motor fuel prices and a 2.1% increase in gallons sold. As previously discussed, we sold our unattended fueling sites in June, 2006, however we continued to supply unbranded fuel to some of those sites. Wholesale motor fuel gross profit of $25.0 million increased 3.0% over 2005 as gross profit cents per gallon increased to 5.6 cents for 2006 compared to 5.5 cents for 2005. The slight increase in gross profit cents per gallon was related to our supply sites and unbranded motor fuel sales.

Service and Other Revenue and Other Gross Profit. Other revenue of $23.2 million for 2006 was up 7.6% over 2005. Gross profit associated with other revenue was $22.8 million, up 8.8% over 2005. The increase over last year was partially driven by an increase in income from our ATM services, prepaid products and from our 16 new retail stores.

Personnel Expense. The largest component of our operating expenses is retail store personnel expense. For 2006, personnel expense was $69.3 million, an increase of $7.1 million, or 11.3%, over 2005. The increase is primarily attributable to stores opened in 2005 and 2006 ($4.7 million), which all have restaurants requiring incremental labor. Additionally, our restaurant sales in all stores, which require more labor, are growing much faster than our other merchandise sales and therefore are contributing to the increase in personnel expense ($1.1 million). We also had an increase in division support ($0.5 million), store staff training ($0.4 million) and benefits ($0.4 million).

 

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Index to Financial Statements

General and Administrative Expense. General and administrative expense was $19.4 million in 2006, a decrease of $17.2 million or 47.1% from 2005. Included in G&A expense are non-cash stock compensation charges of $0.8 million for 2006 and $1.2 million for 2005. Additionally, a $17.3 million compensation charge was recognized in 2005 for the redemption of management options in connection with the 2005 Transaction. In 2006, expenses relating to compliance with the Sarbanes Oxley Act of 2002 and other expenses as a result of becoming a public company, were approximately $0.5 million.

Operating Expenses. Operating expenses were $62.0 million in 2006, an increase of $8.4 million or 15.6% over 2005. The increase was largely driven by increased credit card fees ($3.2 million) from the increase in the average retail price of motor fuel and utility expense from higher energy costs ($1.5 million). The remaining increase is primarily related to our new stores.

Rent Expense. Rent expense of $22.7 million increased by $13.0 million or 133.0% over 2005, due to the sale leaseback of $170.0 million of properties in December 2005. Included in rent expense is a non-cash charge for straight-line rent of $1.6 million and a credit of $1.5 million for amortization of deferred gains from the 2005 sale leaseback, with cash rent expense at $22.6 million.

Royalty Expense. Royalty expense for the use of the Circle K trade name was $3.6 million in 2006, an increase of $0.2 million or 5.2% over 2005. We completed the rebranding of our stores to the Stripes brand during the first quarter of 2007, thus eliminating this royalty in future periods. To support our proprietary Stripes brand, we increased our annual marketing expense by approximately $0.8 million during 2006.

Loss (Gain) on Disposal of Assets and Impairment Charges. During 2006 we sold assets with a net book value of $4.8 million and recognized no gain or loss on disposition of these assets since this was within the one year look-back period from the valuation related to the 2005 Transaction. In accordance with purchase accounting, the book values of assets disposed of within one year of the event were adjusted so no gain or loss was recognized on the sale.

Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expense of $25.4 million decreased by $4.8 million or 16.0% from 2005 primarily due to the elimination of depreciation expense on the assets sold in the December 2005 sale leaseback transaction. Partially offsetting this decrease is depreciation and amortization related to the step-up in basis attributable to the purchase accounting treatment of the 2005 Transaction. Amortization expense included $1.8 million and $3.3 million of write-offs of unamortized loan costs related to debt repayments in 2006 and 2005, respectively.

Income from Operations. Income from operations for 2006 was $18.5 million, compared to $6.4 million for 2005. The $12.1 million or 188.2% increase was primarily attributable to the $17.3 million compensation expense recognized for redemption of management options during 2005. Other changes impacting income from operations are described above.

Interest Expense, Net. Net interest expense for 2006 was $22.6 million, an increase of $4.5 million from 2005. Included in interest expense was $5.3 million in debt prepayment penalties in 2006, compared to $2.9 million in 2005. We paid off $50.0 million of our senior notes in November 2006 with proceeds from the IPO.

Other Miscellaneous Income and Expense. Other miscellaneous includes income from a non-consolidated joint venture and other non-operating income. We recorded $9.8 million in non-recurring charges in 2005 in connection with the December 2005 Transaction, net of $1.4 million in miscellaneous income related to the exercise of warrants that we had received in connection with the 2002 sale of our Fleet Card operations.

Income Taxes. In connection with the closing of the reorganization and initial public offering on October 24, 2006, we converted from a limited liability company to a “C” corporation and established beginning balances in our deferred tax assets and liabilities in accordance with Statement of Financial Accounting

 

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Index to Financial Statements

Standards (“SFAS”) No. 109, Accounting for Income Taxes (“SFAS No. 109”). Accordingly, we recorded a cumulative net deferred tax asset of less than $0.1 million on that date, which consists of a $7.4 million tax benefit recognized upon change of entity status and $2.3 million tax benefit related to operations after the IPO, net of a valuation allowance of $9.7 million. We considered our historical taxable income and estimates of future taxable income in making a determination of a reasonable valuation allowance. We will evaluate this allowance in the future to determine if new circumstances indicate that the realization of any portion of the deferred tax asset is more likely than not.

Net Income or Loss. We recorded a net loss for 2006 of $3.7 million, compared to a net loss of $20.6 million for 2005. The loss in 2005 is primarily due to $33.4 million of one-time charges related to the 2005 Transaction, and the 2006 loss is primarily due to the $7.1 million of 2006 debt repayment charges and the other income and expense items discussed above.

Adjusted EBITDA. Adjusted EBITDA for 2006 was $45.2 million, a decrease of $9.2 million, or 16.9%, compared to 2005. Retail segment Adjusted EBITDA of $25.8 million decreased by $14.5 million, or 36.0%, over 2005 due to the differences in gross profit, SG&A, and rent expense as described above. Wholesale segment Adjusted EBITDA of $19.6 million increased by $2.4 million, or 13.7%, over 2005 primarily due to the increased motor fuel gross profit.

This excerpt taken from the SUSS 10-Q filed Nov 15, 2006.

Nine Months Ended October 1, 2006 Compared to Nine Months ended October 2, 2005

The following discussion of results for the first nine months of 2006 compared to the first nine months of 2005 compares the 39-week period of operations ended October 1, 2006, of Stripes Holdings LLC, to the 39-week period of operations ended October 2, 2005, of Susser Holdings, L.L.C. as predecessor company. The December 2005 transactions did not have a material impact on our core retail and wholesale operations, and therefore the results of operations of the Company and Predecessor are comparable, with the exception of lease expense and interest expense which were impacted by the financing transactions.

Total Revenue. Total revenue for the first nine months of 2006 was $1,777.6 million, an increase of $390.4 million, or 28.1%, over 2005. The increase in total revenue was driven by a 23.7% increase in the average sales price of motor fuel, an 11.2% increase in merchandise sales and a 6.8% increase in motor fuel gallons sold, each as further described below.

Total Gross Profit. Total gross profit for the first nine months of 2006 was $172.7 million, an increase of $24.3 million, or 16.3%, over 2005. The increase was primarily attributable to increases in merchandise sales, merchandise margins, motor fuel margins and motor fuel volumes as further discussed below.

Merchandise Sales and Gross Profit. Merchandise sales were $276.7 million for 2006, a $27.8 million, or 11.2%, increase over 2005. Our performance was due to a 6.0% merchandise same store sales increase, accounting for $14.7 million of the increase, with the balance due to the addition of 8 new retail stores. Key categories contributing to the same store sales increase were Laredo Taco Company, beer, packaged and fountain beverages, and snacks. Merchandise gross profit was $90.5 million for 2006, a $9.7 million, or 12.1%, increase over 2005, which was driven by the increase in merchandise sales and margins. Merchandise margins were 32.7%, up from 32.5% in 2005. Merchandise margin improvements were due to a more favorable product mix emphasizing Laredo Taco Company and dispensed and packaged beverages as well as improvements to shortages.

Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for 2006 were $752.6 million, an increase of 31.5% over 2005, driven by a 19.8% increase in the average retail price of motor fuel and a 9.8% increase in retail gallons sold. The increase in gallons was attributable to a 6.6% increase in average gallons per site and the opening of 8 new retail stores. Retail motor fuel gross profit increased by 25.6% over 2005, due to the increased gallons and an increase in the gross profit per gallon. Gross profit cents per gallon of 15.1 cents was 14.3% higher than 2005.

Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues to third parties for 2006 were $730.9 million, a 32.9% increase over 2005. This increase was attributable to a 27.4% increase in average

 

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wholesale motor fuel prices and a 4.3% increase in gallons sold. Wholesale motor fuel gross profit of $20.0 million increased 25.3% over 2005 as gross profit cents per gallon increased to 5.9 cents for 2006 compared to 4.9 cents for 2005. The increase in gross profit cents per gallon was attained across all categories of gallons sold with the highest increases attributed to consignment motor fuel sales and unbranded motor fuel sales.

Other Revenue and Gross Profit. Other revenue of $17.4 million for the first nine months of 2006 increased by 8.5% over 2005. Gross profit associated with other revenue was $16.9 million, an increase of 8.1% over 2005. The retail segment had other revenue of $14.2 million in 2006 compared to $12.9 million in 2005. Retail segment other gross profit was $14.2 million and $12.9 million, respectively, as we record these service revenues on a net basis. The increase over last year was partially driven by an increase in income from prepaid services and lottery due to the introduction of a state lottery in Oklahoma in October 2005. The prepaid services and lottery increases were partly offset by the continuing decline in payphone and money order income. Other revenues and related gross profit for the wholesale segment were $2.9 million in 2006 and 2.8 million in 2005.

Personnel Expense. The largest component of our operating expense is retail store personnel expense. For the first nine months of 2006, personnel expense was $51.7 million, an increase of $5.2 million, or 11.3%, over 2005. The increase in personnel expense was primarily attributable to increases in our group health insurance expense and our new store openings, which all have restaurants requiring incremental labor. Additionally, our restaurant sales, which require more labor, are growing at a much higher rate than our other merchandise sales and therefore are contributing to the increase in personnel expense.

General and Administrative Expenses. For the first nine months of 2006, general and administrative expenses of $14.5 million were the same as the first nine months of 2005.

Other Operating Expenses. Other operating expenses increased by $9.9 million, or 25.7% over 2005, which was largely driven by increased utility expense from higher energy costs ($2.5 million), credit card fees from the increase in the average retail price of motor fuel ($3.9 million), maintenance expense ($1.2 million) and advertising expense ($0.8 million).

Rent Expense. Rent expense for the first nine months of 2006 of $16.7 million was $9.8 million or 144.1% higher than 2005, due to the December 2005 sale-leaseback transaction.

Royalty Expense. Royalty expense for the first nine months of 2006 of $2.8 million, was up $0.3 million or 10.9% over 2005 due to the increase in merchandise sales. We began rebranding our stores to the Stripes brand during the third quarter of 2006. As of October 1, 2006, in addition to the 5 existing Stripes stores in Houston, we have opened 4 new stores under the Stripes banner and have converted another 48, for a total of 57 Stripes branded retail stores. We expect that substantially all retail stores will be converted to the Stripes brand by the end of 2006. Upon the completion of our rebranding, royalty expense will be eliminated for all stores previously branded Circle K. To support our proprietary Stripes brand, we intend to increase our annual marketing expense by approximately $0.8 million per year.

Loss (Gain) on Disposal of Assets and Impairment Charges. Gain on disposal of assets for the first nine months of 2006 of $0.3 million decreased by $0.2 million from 2005 due to fewer sales of property with a gain over net book value.

Depreciation, Amortization and Accretion. Depreciation and amortization expense for the first nine months of 2006 of $17.7 million decreased $2.0 million or 10.3% from 2005 due to the December 2005 transactions.

Income from Operations. Income from operations for the first nine months of 2006 was $21.1 million, compared to $20.2 million for 2005. The increase was attributable to the increase in sales and gross profit, offset in part by higher rent expense and operating expenses as discussed above.

Interest Expense, Net. Net interest expense for the first nine months of 2006 was $14.1 million, an increase of $3.3 million from 2005. The increase was due to the issuance of the 10 5/8% senior notes in December 2005, net of the repayment of all prior indebtedness.

 

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Other Miscellaneous Income and Expense. Other miscellaneous income for the first nine months of 2006 is $0.2 million compared to $1.1 million in 2005. The decrease was primarily due to the realization of a $1.4 million gain in the third quarter of 2005 on the sale of certain warrants that were granted to Susser Holdings LLC.

Net Income or Loss. We recorded net income for the first nine months of 2006 of $7.2 million, compared to net income of $10.5 million for 2005. The decrease is primarily due to increased rent expense of $9.8 million related to the December 2005 transactions and other operating expenses offsetting increases in sales and gross profit as discussed above.

Adjusted EBITDA. Adjusted EBITDA for the first nine months of 2006 was $39.3 million, a decrease of $1.3 million, or 3.2%, compared to 2005. The decrease is primarily due to the additional $9.8 million of rent expense related to the December 2005 sale-leaseback, and to the increases in energy-related costs described above. Retail segment Adjusted EBITDA of $25.8 million decreased by $5.5 million, or 17.5% compared to 2005, primarily due to the $9.8 million additional rent and utility and credit card expenses. Wholesale segment Adjusted EBITDA of $15.2 million increased by $3.8 million, or 33.2%, over 2005 primarily due to the increased motor fuel gross profit.

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