Susser (SUSS) 10-Q 2009 Q2 Quarterly report

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: June 28, 2009

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  ¨    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	17,136,943 SHARES
(Class)	(Outstanding at August 6, 2009)

SUSSER HOLDINGS CORPORATION

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	33
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Submission of Matters to a Vote of Security Holders	35
Item 5. Other Information	36
Item 6. Exhibits	36

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Susser Holdings Corporation

Consolidated Balance Sheets

	December 28, 2008		June 28, 2009
	audited		unaudited
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	8,284	$	14,079
Accounts receivable, net of allowance for doubtful accounts of $1,070 at December 28, 2008 and $1,228 at June 28, 2009		51,549		59,321
Inventories, net		62,878		71,136
Other current assets		4,703		4,010
Total current assets		127,414		148,546
Property and equipment, net		408,733		408,431
Other assets:
Goodwill		237,953		237,953
Intangible assets, net		34,609		33,892
Other noncurrent assets		15,647		15,583
Total other assets		288,209		287,428
Total assets	$	824,356	$	844,405
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	90,911	$	117,198
Accrued expenses and other current liabilities		34,738		31,346
Current maturities of long-term debt		9,233		11,201
Deferred purchase price – TCFS acquisition		10,000		10,000
Total current liabilities		144,882		169,745
Long-term debt		395,736		390,140
Revolving line of credit		3,630		3,050
Deferred gain, long-term portion		33,720		32,679
Deferred tax liability, long-term portion		28,323		27,393
Other noncurrent liabilities		13,087		13,478
Total long-term liabilities		474,496		466,740
Commitments and contingencies:
Equity:
Susser Holdings Corporation shareholders’ equity:
Common stock, $.01 par value; 125,000,000 shares authorized; 17,048,972 issued and 17,037,648 outstanding as of December 28, 2008; 17,142,427 issued and 17,131,103 outstanding as of June 28, 2009		170		170
Additional paid-in capital		180,189		181,918
Retained earnings		23,888		25,122
Accumulated other comprehensive loss		—		(41	)
Total Susser Holdings Corporation shareholders’ equity		204,247		207,169
Noncontrolling interest		731		751
Total equity		204,978		207,920
Total liabilities and shareholders’ equity	$	824,356	$	844,405

See accompanying notes.

1

Susser Holdings Corporation

Consolidated Statements of Operations

Unaudited

	Three Months Ended						Six Months Ended
	June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(dollars in thousands, except per share amounts)
Revenues:
Merchandise sales	$	187,870		$	199,940		$	356,641		$	381,859
Motor fuel sales		1,033,216			613,929			1,855,608			1,103,328
Other income		9,074			9,297			18,617			18,697
Total revenues		1,230,160			823,166			2,230,866			1,503,884
Cost of sales:
Merchandise		123,454			133,444			235,557			252,947
Motor fuel		993,622			581,911			1,790,177			1,045,855
Other		539			(5	)		979			95
Total cost of sales		1,117,615			715,350			2,026,713			1,298,897
Gross profit		112,545			107,816			204,153			204,987
Operating expenses:
Personnel		34,515			36,865			64,812			72,252
General and administrative		8,049			8,227			17,112			17,091
Other operating		30,617			29,649			58,648			55,000
Rent		8,675			9,030			17,086			18,043
Loss on disposal of assets		53			106			151			158
Depreciation, amortization, and accretion		10,345			10,549			21,081			20,512
Total operating expenses		92,254			94,426			178,890			183,056
Income from operations		20,291			13,390			25,263			21,931
Other income (expense):
Interest expense, net		(9,490	)		(9,456	)		(19,352	)		(19,089	)
Other miscellaneous		56			(59	)		214			18
Total other expense, net		(9,434	)		(9,515	)		(19,138	)		(19,071	)
Income before income taxes		10,857			3,875			6,125			2,860
Income tax expense		(4,184	)		(1,703	)		(2,800	)		(1,607	)
Net income		6,673			2,172			3,325			1,253
Less: Net income attributable to noncontrolling interests		11			7			23			19
Net income attributable to Susser Holdings Corporation	$	6,662		$	2,165		$	3,302		$	1,234
Net income per share attributable to Susser Holdings Corporation:
Basic	$	0.39		$	0.13		$	0.20		$	0.07
Diluted	$	0.39		$	0.13		$	0.19		$	0.07
Weighted average shares outstanding:
Basic		16,880,404			16,931,173			16,880,404			16,927,848
Diluted		16,949,921			17,006,903			16,978,748			16,995,549

See accompanying notes.

2

Susser Holdings Corporation

Consolidated Statements of Cash Flows

Unaudited

	Six Months Ended
	June 29, 2008			June 28, 2009
	(in thousands)
Cash flows from operating activities:
Net income	$	3,325		$	1,253
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion		21,081			20,512
Loss on disposal of property and impairment charge		151			158
Non–cash stock based compensation		1,830			1,586
Deferred income tax		(3,102	)		(167	)
Amortization of debt premium		(232	)		(301	)
Changes in operating assets and liabilities:
Receivables		(40,299	)		(7,823	)
Inventories		(13,811	)		(8,258	)
Assets held for sale and other current assets		1,925			(47	)
Intangible assets, net		(287	)		1,135
Other noncurrent assets		2,444			204
Accounts payable		35,795			26,290
Accrued liabilities		(4,416	)		(1,423	)
Other noncurrent liabilities		2,916			(2,784	)
Net cash provided by operating activities		7,320			30,335
Cash flows from investing activities:
Purchases of property and equipment		(37,284	)		(23,417	)
Proceeds from disposal of property and equipment		6			176
Proceeds from sale/leaseback transactions		26,767			2,838
Net cash used in investing activities		(10,511	)		(20,403	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		30,736			—
Change in notes receivable		(31	)		(145	)
Payments on long-term debt		(1,312	)		(3,327	)
Revolving line of credit, net		(19,630	)		(580	)
Loan origination costs		—			(227	)
Proceeds from issuance of equity		—			142
Net cash provided by (used in) financing activities		9,763			(4,137	)
Net increase in cash		6,572			5,795
Cash and cash equivalents at beginning of year		7,831			8,284
Cash and cash equivalents at end of period	$	14,403		$	14,079

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, and Oklahoma. 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, and Oklahoma. 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 $300 million of senior notes outstanding at June 28, 2009, 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 39 units, located primarily inside Stripes’ retail stores, which provide short-term loan services 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 2008 refer to the 52-week period ended December 28, 2008. All references to the second quarter of 2008 and 2009 refer to the 13-week periods ended June 29, 2008 and June 28, 2009, respectively. Stripes follows the same accounting calendar as the Company. SPC and APT use calendar month accounting periods, and end their 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 June 28, 2009 and for the six months ended June 29, 2008 and June 28, 2009 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 and six months ended June 29, 2008 and June 28, 2009 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 December 28, 2008.

4

Certain prior year balances have been reclassified for comparative purposes. Deferred rebranding incentives have been reclassified from a reduction of operating expenses to fuel cost of sales for all years presented. The amounts for fuel vendor incentives were $0.2 million and $0.3 million for second quarter 2008 and 2009, respectively and $0.3 million and $0.5 million for the six months ended June 29, 2008 and June 28, 2009, respectively.

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 June 28, 2009, up until the issuance of the financial statements, which occurred on August 7, 2009.

2. New Accounting Pronouncements

SFAS No. 141R

In December 2007, the FASB issued SFAS No. 141R,Business Combinations. SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statement to evaluate the nature and financial effects of the business combination. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Since no acquisitions were made during the first half of 2009, SFAS No. 141R had no impact on the Company’s financial statements as of June 28, 2009. The Company expects SFAS No. 141R will have an impact on its consolidated financial statements relative to any future acquisitions, but the nature and magnitude of the specific effects will depend upon the nature, terms and size of the acquisitions it consummates after the effective date.

SFAS No. 160

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51. SFAS No. 160 changes the accounting and reporting for minority interests. Minority interests has been re-characterized as noncontrolling interests and has been reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control are accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest is included in consolidated net income on the face of the income statement and upon a loss of control, the interest sold, as well as any interest retained, is recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, except for the presentation and disclosure requirements, which applied retrospectively. The adoption of this statement as of the beginning of our 2009 fiscal year did not have a material impact on our financial statements.

FSP FAS 107-1 and APB 28-1

In April 2009, the FASB issued FSP No. FAS-107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, to require disclosures about fair values of financial instruments for interim reporting periods as well as in annual financial statements. The FSP also amends APB Opinion No. 28 to require those disclosures in summarized financial information at interim reporting periods. This FSP was effective for interim reporting periods ending after June 15, 2009. We have included these additional disclosures in Note 7. The adoption of this FSP did not have a material impact on our financial statements.

SFAS 165

In May 2009, the FASB issued SFAS No. 165,Subsequent Events. SFAS No. 165 was issued in order to establish principles and requirements for reviewing and reporting subsequent events and requires disclosure of the date through which subsequent events are evaluated and whether the date corresponds with the time at which the financial statements were available for issue (as defined) or were issued. SFAS No. 165 is effective for interim reporting periods ending after June 15, 2009. The Company adopted SFAS No. 165 for the quarter ended June 28, 2009 with no impact on the Company’s financial statements. See Note 1.

5

SFAS 168

In June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards Codification and theHierarchy of Generally Accepted Accounting Principles. The objective of this Statement is to replace Statement 162 and to establish the FASB Accounting Standard Codification as the single source of authoritative nongovernmental U.S. GAAP. All existing accounting standards documents are superseded as described in SFAS No. 168. The Codification is effective for interim and annual periods ending after September 15, 2009. The Company does not expect SFAS No. 168 will have a material impact on its consolidated financial statements, and will change all references to U.S. GAAP within its financial statements for all filings beginning with the quarter ended September 27, 2009, to be consistent with the new FASB Accounting Standard Codification.

3. Accounts Receivable

Accounts receivable consisted of the following:

	December 28, 2008			June 28, 2009
	(in thousands)
Accounts receivable, trade	$	35,829		$	44,194
Receivable from state reimbursement funds		1,529			1,191
Vendor receivables for rebates, branding, and others		7,739			7,364
ATM fund receivables		4,216			5,292
Notes receivable, short term		641			646
Other receivables		2,665			1,862
Allowance for uncollectible accounts, trade		(729	)		(944	)
Allowance for uncollectible accounts, environmental		(341	)		(284	)
Accounts receivables, net	$	51,549		$	59,321

4. Inventories

Inventories consisted of the following:

	December 28, 2008			June 28, 2009
	(in thousands)
Merchandise	$	41,425		$	46,848
Fuel-retail		15,740			17,276
Fuel-wholesale consignment		1,639			2,551
Lottery		1,657			1,726
Maintenance spare parts and equipment		3,232			3,359
Allowance for inventory shortage and obsolescence		(815	)		(624	)
Total	$	62,878		$	71,136

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5. Property and Equipment

Property and equipment consisted of the following:

	December 28, 2008		June 28, 2009
	(in thousands)
Land	$	122,883	$	125,958
Buildings and leasehold improvements		197,069		200,160
Equipment		155,002		159,234
Construction in progress		15,326		24,487
		490,280		509,839
Less accumulated depreciation		81,547		101,408
Total	$	408,733	$	408,431

6. Goodwill and Other Intangible Assets

Goodwill is not being amortized, but is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired.

In accordance with SFAS No. 142, the Company has finite–lived intangible assets recorded that are amortized and indefinite-lived assets that do not amortize. The finite–lived assets consist of supply agreements, favorable/unfavorable leasehold arrangements, loan origination costs and trade names, 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 eight years. The Laredo Taco Company trade name is being amortized over fifteen years. The Town & Country Food Stores trade name is being amortized over five 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 December 28, 2008 and June 28, 2009:

	December 28, 2008						June 28, 2009
	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
	(in thousands)
Non–Amortizing
Trade name	$	570	$	—	$	570	$	570	$	—	$	570
Franchise rights		389		—		389		389		—		389
Liquor licenses		11,185		—		11,185		11,600		—		11,600
Amortizing
Supply agreements		5,952		2,203		3,749		6,585		2,554		4,031
Favorable lease arrangements, net		2,879		2,517		362		2,879		2,306		573
Loan origination costs		18,142		4,528		13,614		18,367		6,076		12,291
Trade names		5,756		1,222		4,534		5,756		1,469		4,287
Other		520		314		206		520		369		151
Total	$	45,393	$	10,784	$	34,609	$	46,666	$	12,774	$	33,892

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7. Long -Term Debt

Long-term debt consisted of the following:

	December 28, 2008		June 28, 2009
	(in thousands)
10 5/8% senior unsecured notes due 2013	$	300,000	$	300,000
Term loan facility, bearing interest at LIBOR plus applicable margin (3.70% at December 28, 2008 and 2.32% at June 28, 2009), principal due in quarterly installments through November 13, 2012		101,063		97,781
Revolving credit agreement, bearing interest at Prime or LIBOR plus applicable margin, (3.75% at December 28, 2008 and 3.25% at June 28, 2009)		3,630		3,050
Other notes payable		135		90
Unamortized bond premium		3,771		3,470
Total debt		408,599		404,391
Less: Current maturities		9,233		11,201
Long–term debt, net of current maturities	$	399,366	$	393,190

The fair value of debt as of June 28, 2009, is estimated to be approximately $403.3 million, based on the reported trading activity of the Senior Notes at that time, and the par value of the variable-rate term loan, revolving credit facility and promissory note.

Senior Unsecured Notes

In December 2005, the Company, through its subsidiaries Susser Holdings, L.L.C. and Susser Finance Corporation, issued $170.0 million 10 5/8% senior unsecured notes (the “Senior Notes”). The Senior Notes pay interest semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2006, until they mature on December 15, 2013.

The Senior Notes contain covenants that, among other things and subject to various exceptions, restrict the Company’s ability and any restricted subsidiary’s ability to incur additional debt, make restricted payments (including paying dividends on, redeeming or repurchasing capital stock), dispose of assets, and other restrictions. The Senior Notes also contain certain financial covenants. On November 24, 2006, the Company redeemed $50.0 million of the Senior Notes with proceeds from the IPO, as allowed by the indenture. On November 13, 2007, in connection with the TCFS Acquisition, the Company issued additional $150.0 million Senior Notes and on June 23, 2008, the Company issued an additional $30.0 million Senior Notes. The additional notes are all governed by the same indenture as the original Senior Notes.

On or after December 15, 2009, the Company may redeem some or all of the $300.0 million remaining Senior Notes at any time at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest and liquidated damages, if any: in 2009, at 105.313%; in 2010, at 102.656%; and in 2011 and thereafter, at 100.000%.

Credit Facilities

On November 13, 2007, Susser Holdings, L.L.C. entered into a credit agreement with a syndicate of financial institutions, providing for a five-year revolving credit facility in an aggregate principal amount of up to $90.0 million, and a five-year term loan facility in the aggregate principal amount of $105.0 million (the “term loan”). On May 6, 2008, we, Susser Holdings, L.L.C. and the financial institutions party to the credit agreement entered in to Amendment No. 1 to the credit agreement (“Amendment No. 1”), which increased the aggregate commitments under the revolving credit facility to $120.0 million (we refer to the revolving credit facility, as amended by Amendment No. 1, as the “revolver”).

8

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 35% of the aggregate borrowing base amount, minus (d) such reserves as the administrative agent of the revolver 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) 85% of gross accounts receivable plus 60% of gross inventory. Up to $60 million of the revolver may be used for the issuance of standby and commercial letters of credit and a portion of the revolver is available for swingline loans. As of June 28, 2009, we had $3.1 million outstanding under the revolving credit facility and $22.1 million in standby letters of credit. Our borrowing base in effect at June 28, 2009 allowed a maximum borrowing, including outstanding letters of credit, of $97.7 million. Our unused availability on the revolver at June 28, 2009 was $72.5 million.

The interest rates for both the revolver and term loan facility 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. We pay a commitment fee on the unused portion of the Revolver, currently .375% per annum, and is subject to adjustment based on a leverage grid.

The term loan facility and the revolver may be prepaid at any time in whole or in part without premium or penalty, other than breakage costs if applicable, and require 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 June 28, 2009.

Fair Value Measurements

SFAS No. 157 defines and establishes a framework for measuring fair value and expands related disclosures. This Statement does not require any new 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, and equipment, intangible assets, and goodwill. The Statement does not apply to share-based payment transactions and inventory pricing. SFAS No. 157 was effective for the Company’s financial assets and financial liabilities beginning in 2008. In February 2008, FASB Staff Position 157-2, Effective Date of Statement 157, deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The nonfinancial assets and nonfinancial liabilities held by the Company include asset retirement obligations, assets held for sale, goodwill, and trade names.

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 are derived from such prices or parameters. Where observable prices or inputs are not available, use of unobservable prices or inputs are 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.

SFAS No. 157 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. During the first quarter of 2009, the Company entered into interest rate swaps on $70 million notional principal for a three-year term. The swaps exchange a floating to fixed rate against our variable-rate term loan. These contracts have been designated as cash flow hedges, and the Company determined that these futures contracts are defined as Level 2 in the fair value hierarchy. The interest rate

9

swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk. The Company recognized $374,000 in additional interest expense (effective portion) during the first half of 2009 associated with this interest rate swap and recognized a $41,000 loss, net of tax, in Other Comprehensive Income on a deferred basis. No gains or losses from ineffectiveness were recorded as the interest rate swaps are considered highly effective. In the event any portion is deemed not effective, the resulting gain or loss would be classified to interest expense in the Company’s consolidated statement of operations. The Company expects to reclassify approximately $0.7 million into net income as additional interest expense during the next twelve months. At June 28, 2009, these interest rate swaps had a market value of ($64,000) which is classified in other non-current liabilities in the Company’s consolidated balance sheet.

The Company also periodically enters into derivatives, such as futures and options, to manage its fuel price risk, primarily related to purchases of fuel on the Gulf Coast and transported via pipeline to West Texas. 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 pipeline inventory. Fuel hedging positions have not been material to our operations. These positions have been designated as fair value hedges. The fair value of our derivative contracts are measured using Level 2 inputs, and are 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 December 28, 2008, the Company held fuel futures contracts with a fair value of ($140,000), (75 contracts representing 3.2 million gallons). At June 28, 2009, the Company held fuel futures contracts with a fair value of $9,000 (5 contracts representing 0.2 million gallons), which is classified in other current assets in the Company’s consolidated balance sheets. The Company recognized $1.1 million in loss during the first half of 2009 related to these contracts, which is classified in motor fuel cost of sales in the consolidated statements of operations. The loss realized on hedging contracts during the first six months is substantially offset by increased profitability on sale of fuel purchased from the pipeline.

8. Commitments and Contingencies

Leases

The Company leases a portion of its convenience store properties under non-cancellable operating leases, whose initial 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 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						Six Months Ended
	June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(in thousands)
Cash rent:
Store base rent	$	8,596		$	9,092		$	16,913		$	18,125
Equipment rent		182			146			377			347
Contingent rent		91			54			121			94
Total cash rent	$	8,869		$	9,292		$	17,411		$	18,566
Non–cash rent:
Straight-line rent		313			249			631			499
Amortization of deferred gain		(507	)		(511	)		(956	)		(1,022	)
Net rent expense	$	8,675		$	9,030		$	17,086		$	18,043

Letters of Credit

We were contingently liable for $22.1 million related to irrevocable letters of credit required by various insurers and suppliers at June 28, 2009. Included in this amount is a $10 million letter of credit held in escrow related to the TCFS Acquisition that will be eligible to be drawn upon in November 2009, net of any settled or pending indemnity claims.

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9. Interest Expense and Interest Income

The components of net interest expenses are as follows:

	Three Months Ended						Six Months Ended
	June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(in thousands)
Interest expense	$	8,959		$	8,802		$	18,110		$	17,692
Capitalized interest		(77	)		(93	)		(95	)		(101	)
Amortization of loan costs & issuance premium		636			773			1,394			1,550
Cash interest income		(28	)		(26	)		(57	)		(52	)
Interest expense, net	$	9,490		$	9,456		$	19,352		$	19,089

10. Income Tax

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the three months and six months ended June 28, 2009 and June 29, 2008 is as follows:

	Three Months Ended June 28, 2009			Six Months Ended June 28, 2009
	(in thousands)		Tax rate%	(in thousands)		Tax rate%
Tax at statutory federal rate	$	1,353	35.0	$	994	35.0
State and local tax, net of federal benefit		326	8.4		599	21.1
Other		24	0.6		14	0.5
Tax expense per financial statement	$	1,703	44.0	$	1,607	56.6

	Three Months Ended June 29, 2008			Six Months Ended June 29, 2008
	(in thousands)		Tax rate %	(in thousands)		Tax rate %
Tax at statutory federal rate	$	3,796	35.0	$	2,136	35.0
State and local tax, net of federal benefit		377	3.5		643	10.6
Other		11	0.1		21	0.3
Tax expense per financial statement	$	4,184	38.6	$	2,800	45.9

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”). The margin tax accrued for the six months ended June 29, 2008 and June 28, 2009 was $1.0 million and $1.0 million, respectively.

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, and New Mexico. The Company is subject to examinations in all jurisdictions for all returns filed since October 24, 2006.

As of June 28, 2009, 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.

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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. A total of 125,000,000 shares of common stock have been authorized, $0.01 par value, of which 17,048,972 were issued and 17,037,648 were outstanding as of December 28, 2008, and 17,142,427 were issued and 17,131,103 were outstanding as of June 28, 2009, respectively. Included in these amounts are 119,130 and 199,930 shares, respectively, which represent restricted shares and are not yet vested and have no voting rights. Treasury shares consist of 11,324 shares issued as restricted shares, which were forfeited prior to vesting. A total of 25,000,000 preferred shares have also been authorized, par value $0.01 per share, although none have been issued. Options to purchase 1,744,002 shares of common stock are outstanding as of June 28, 2009, 320,999 of which are vested. (See Note 12)

12. Share-Based Compensation

The Company has granted options and restricted stock subject to vesting requirements under its 2006 Equity Incentive Plan. Vesting of each grant is generally over five years, with 33.3% of such units vesting on the third, fourth, and fifth anniversary of grant date. Following is a summary of options and restricted stock which have been granted under the Company’s plan:

	Stock Options
	Number Options Outstanding		Weighted Average Exercise Price
Balances at December 31, 2006	1,228,291		$	16.07
Granted	482,743			22.57
Exercised	—			—
Forfeited or expired	(160,817	)		15.98
Balances at December 30, 2007	1,550,217			18.11
Granted	475,480			17.14
Forfeited or expired	(316,855	)		21.70
Balances at December 28, 2008	1,708,842			17.17
Granted	60,000			12.27
Forfeited or expired	(24,840	)		17.92
Balances at June 28, 2009	1,744,002		$	16.99
Exercisable at June 28, 2009	320,999		$	14.36

	Restricted Stock
	Number of Units		Grant-Date Average Fair Value Per Unit
Nonvested at December 31, 2006	118,758		$	14.83
Granted	7,500			17.92
Vested	—			—
Forfeited	(11,324	)		14.83
Nonvested at December 30, 2007	114,934			15.03
Granted	40,000			20.86
Vested	(35,804	)		14.83
Forfeited	—			—
Nonvested at December 28, 2008	119,130			17.05
Granted	80,800			12.25
Vested	—			—
Forfeited	—			—
Nonvested at June 28, 2009	199,930		$	15.11

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During the second quarter of 2009, we granted 5,000 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 $33,000, which will be amortized to expense over the options’ requisite service periods.

We adopted SFAS No. 123(R) at the beginning of fiscal 2006 when we were still a private company. Because we used the minimum value method for pro forma disclosures under SFAS No. 123, we are applying SFAS No. 123(R) prospectively to newly issued stock options. Stock options granted during 2005 will continue to be accounted for in accordance with APB Opinion No. 25 unless such options are modified, repurchased or cancelled after the effective date. We recognized non-cash stock compensation expense of $1.0 million and $0.8 million during the three months ended June 29, 2008 and June 28, 2009, respectively, and $1.8 million and $1.6 million during the six months ended June 29, 2008 and June 28, 2009, respectively, which is included in general and administrative expense.

Had compensation cost for the options granted in 2005 been determined based on the grant-date fair value of awards consistent with the method set forth in SFAS No. 123(R), the Company’s net profits and losses for the periods presented would have been affected as follows:

	Three Months Ended						Six Months Ended
	June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(in thousands)
Net income attributable to Susser Holdings Corporation, as reported	$	6,662		$	2,165		$	3,302		$	1,234
Deduct:
Compensation expense on options determined under fair value based method for all awards, net of tax		(18	)		(11	)		(37	)		(22	)
Pro forma net income attributable to Susser Holdings Corporation	$	6,644		$	2,154		$	3,265		$	1,212

13. Other Comprehensive Income:

	Six Months Ended June 28, 2009
	(in thousands)
Balance at the beginning of the period	—
Amount reclassified to income, net of tax (benefit) of ($131)	(243	)
Net change in fair value of interest rate swaps, net of tax expense of $109	202
Balance at end of the period	(41	)

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Other comprehensive income is comprised of the following:

	Three Months Ended				Six Months Ended
	June 29, 2008		June 28, 2009		June 29, 2008		June 28, 2009
	(in thousands)
Net income	$	6,673	$	2,172	$	3,325	$	1,253
Net unrealized gain (loss) in fair value of cash flow hedges, net of tax expense (benefit) of $168 and ($22)		—		312		—		(41	)
Total other comprehensive income, net of tax expense		6,673		2,484		3,325		1,212
Less:
Comprehensive income attributable noncontrolling interest		11		7		23		19
Comprehensive income attributable to Susser Holdings Corporation	$	6,662	$	2,477	$	3,302	$	1,193

14. 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, check cashing, and pay phones. 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 commercial consumers of motor fuel. Sales of fuel from the wholesale to retail segment are at delivered 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.

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Segment Financial Data for the Three Months Ended June 29, 2008

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment		Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	187,870	$	—	$	—		$	—		$	187,870
Fuel		618,037		895,292		(480,113	)		—			1,033,216
Other		7,266		3,642		(2,138	)		304			9,074
Total revenue		813,173		898,934		(482,251	)		304			1,230,160
Gross profit:
Merchandise		64,416		—		—			—			64,416
Fuel		32,165		7,429		—			—			39,594
Other		7,266		1,236		(16	)		49			8,535
Total gross profit		103,847		8,665		(16	)		49			112,545
Selling, general, and administrative		76,950		2,312		(16	)		2,610			81,856
Depreciation, amortization, and accretion		9,253		962		—			130			10,345
Other operating expenses		15		38		—			—			53
Operating income (loss)	$	17,629	$	5,353	$	—		$	(2,691	)	$	20,291
Gallons		165,113		271,121		(146,792	)		—			289,442
Gross capital expenditures	$	19,692	$	2,303	$	—		$	46		$	22,041

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Segment Financial Data for the Three Months Ended June 28, 2009

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment			Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	199,940	$	—		$	—		$	—		$	199,940
Fuel		392,593		521,650			(300,314	)		—			613,929
Other		7,323		4,106			(2,248	)		116			9,297
Total revenue		599,856		525,756			(302,562	)		116			823,166
Gross profit:
Merchandise		66,496		—			—			—			66,496
Fuel		26,988		5,030			—			—			32,018
Other		7,323		1,974			(16	)		21			9,302
Total gross profit		100,807		7,004			(16	)		21			107,816
Selling, general, and administrative		79,335		2,290			(16	)		2,162			83,771
Depreciation, amortization, and accretion		9,402		1,019			—			128			10,549
Other operating expenses (income)		109		(3	)		—			—			106
Operating income (loss)	$	11,961	$	3,698		$	—		$	(2,269	)	$	13,390
Gallons		177,887		302,650			(176,818	)		—			303,719
Gross capital expenditures	$	16,281	$	861		$	—		$	—		$	17,142

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Segment Financial Data for the Six Months Ended June 29, 2008

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment		Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	356,641	$	—	$	—		$	—		$	356,641
Fuel		1,137,834		1,493,151		(775,377	)		—			1,855,608
Other		14,921		7,470		(4,181	)		407			18,617
Total revenue		1,509,396		1,500,621		(779,558	)		407			2,230,866
Gross profit:
Merchandise		121,084		—		—			—			121,084
Fuel		52,422		13,009		—			—			65,431
Other		14,921		2,642		(31	)		106			17,638
Total gross profit		188,427		15,651		(31	)		106			204,153
Selling, general, and administrative		147,579		5,009		(31	)		5,101			157,658
Depreciation, amortization, and accretion		18,572		2,254		—			255			21,081
Other operating expenses		110		38		—			3			151
Operating income (loss)	$	22,166	$	8,350	$	—		$	(5,253	)	$	25,263
Gallons		334,426		501,842		(263,403	)		—			572,865
Total assets	$	740,129	$	145,399	$	—		$	17,397		$	902,925
Goodwill	$	234,979	$	13,320	$	—		$	—		$	248,299
Gross capital expenditures	$	33,738	$	3,417	$	—		$	129		$	37,284

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Segment Financial Data for the Six Months Ended June 28, 2009

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment			Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	381,859	$	—		$	—		$	—		$	381,859
Fuel		714,666		919,649			(530,987	)		—			1,103,328
Other		14,674		8,276			(4,479	)		226			18,697
Total revenue		1,111,199		927,925			(535,466	)		226			1,503,884
Gross profit:
Merchandise		128,912		—			—			—			128,912
Fuel		48,192		9,281			—			—			57,473
Other		14,674		3,965			(32	)		(5	)		18,602
Total gross profit		191,778		13,246			(32	)		(5	)		204,987
Selling, general, and administrative		152,874		5,162			(32	)		4,382			162,386
Depreciation, amortization, and accretion		18,221		2,042			—			249			20,512
Other operating expenses (income)		164		(6	)		—			—			158
Operating income (loss)	$	20,519	$	6,048		$	—		$	(4,636	)	$	21,931
Gallons		357,299		602,788			(354,487	)		—			605,600
Total assets	$	727,120	$	94,547		$	143		$	22,595		$	844,405
Goodwill	$	221,543	$	16,410		$	—		$	—		$	237,953
Gross capital expenditures	$	21,425	$	1,992		$	—		$	—		$	23,417

15. Earnings Per Share

The Company is presenting earnings per share for the historical periods using the guidance provided in SFAS No. 128,Earnings per Share (EPS). Under SFAS No. 128, 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 options are excluded from the diluted EPS computation.

Per unit 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 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 and restricted stock granted under the 2006 Equity Incentive Plan. (See Note 12)

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A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows:

	Three Months Ended				Six Months Ended
	June 29, 2008		June 28, 2009		June 29, 2008		June 28, 2009
	(dollars in thousands)
Net income attributable to Susser Holdings Corporation	$	6,662	$	2,165	$	3,302	$	1,234
Denominator for basic earnings per share:
Weighted average number of common shares outstanding during the period		16,880,404		16,931,173		16,880,404		16,927,848
Incremental common shares attributable to exercise of outstanding dilutive options and restricted shares		69,517		75,730		98,344		67,701
Denominator for diluted earnings per common share		16,949,921		17,006,903		16,978,748		16,995,549
Net income per share, attributable to Susser Holdings Corporation:
Per common share – basic	$	0.39	$	0.13	$	0.20	$	0.07
Per common share – diluted	$	0.39	$	0.13	$	0.19	$	0.07
Options and non-vested restricted shares not included in diluted net income attributable to Susser Holdings Corporation common shareholders because the effect would be anti-dilutive		1,438,206		1,750,615		1,419,355		1,762,685

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 December 28, 2008. Our fiscal year contains either 52 or 53 weeks and ends on the Sunday closest to December 31. All references to the second quarter of 2008 and 2009 refer to the 13-week periods ended June 29, 2008 and June 28, 2009, respectively. EBITDA and Adjusted EBITDA 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 2 under “Key Operating Metrics” below for a discussion of our use of EBITDA and Adjusted EBITDA 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 statements, including:

• Competitive pressures from convenience stores, gasoline stations, other non-traditional retailers located in our markets and other wholesale fuel distributors;

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• Volatility in crude oil and wholesale petroleum costs;

• Currently unknown liabilities in connection with the acquisition of Town & Country;

• 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;

• Intense competition and fragmentation in the wholesale motor fuel distribution industry;

• The operation of our stores in close proximity to stores of our dealers;

• Changes in economic conditions, generally, and in the markets we serve, consumer behavior, and travel and tourism trends;

• Seasonal trends in the industries in which we operate;

• Unfavorable weather conditions;

• Cross-border risks associated with the concentration of our stores in markets bordering Mexico;

• Inability to identify, acquire and 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;

• Dangers inherent in storing and transporting motor fuel;

• Pending or future consumer or other litigation;

• Our ability to insure our motor fuel operations;

• Dependence on one principal supplier for merchandise;

• Dependence on two principal suppliers for motor fuel and one principal provider for third-party transportation of substantially all motor fuel;

• Dependence on senior management and the ability to attract qualified employees;

• Acts of war and terrorism;

• Risks relating to our substantial indebtedness;

• Dependence on our information technology systems;

• Changes in accounting standards; 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 December 28, 2008, 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 is 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 June 28, 2009, our retail segment operated 515 convenience stores in

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Texas, New Mexico and Oklahoma, offering merchandise, food service, motor fuel and other services. During the second quarter 2009 we opened two new stores, and as of July 27, 2009, we have opened another two in the third quarter, giving us five new retail stores to date in 2009. We expect to add a total of 12 to 16 for the year, including acquired stores.

For the six months ended June 28, 2009, we sold 605.6 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. As of June 28, 2009, we supplied 372 dealer locations. We believe our combined retail/wholesale business model, scale, market share, and food service and merchandising offerings, combined with our highly productive new store model and selective acquisition opportunities, position us for ongoing growth in sales and profitability.

Our total revenues, net income attributable to Susser Holdings Corporation and Adjusted EBITDA were $823.2 million, $2.2 million and $24.9 million, respectively, for second quarter 2009, compared to $1,230.2 million, $6.7 million and $31.7 million, respectively, for second quarter 2008. Our total revenues, net income attributable to Susser Holdings Corporation and Adjusted EBITDA were $1,503.9 million, $1.2 million and $44.2 million, respectively, for the first half of 2009, compared to $2,230.9 million, $3.3 million and $48.3 million, respectively, for the first half of 2008. 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”.

After experiencing record-high energy prices in mid-2008, the cost of crude oil fell from $145 per barrel in July 2008 to under $40 per barrel early in the first quarter of 2009. While still well below mid-2008 levels, the cost of crude oil was on an upward trend throughout the second quarter, peaking at just over $70/barrel. With the increase in crude oil prices, we also experienced increasing motor fuel costs which resulted in lower fuel margins during the second quarter compared to prior year.

The economy in Texas, Oklahoma and New Mexico 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 strong population growth demographics. However, the dramatic reduction in commodity prices and the national recession and recession in Mexico has triggered significantly increased unemployment and reduced economic activity in our markets in recent months. In spite of the current economic trends, our business tends to be more resilient than many other retail formats, and we are still experiencing positive comparable merchandise and fuel volume results over the prior periods.

The current turmoil in the nation’s credit markets is affecting our lenders and the real estate finance markets we have relied on in recent years to finance significant acquisitions and new store development. We believe we have adequate liquidity and financial flexibility to continue to operate and grow our business, but we are exercising caution in our capital spending program until we see an improvement in the credit markets. As of June 28, 2009, we had $3.1 million drawn and $22.1 million in standby letters of credit issued against our $120.0 million revolving line of credit. As of June 28, 2009, our unused availability under the revolver was $72.5 million. We have no significant maturities of long-term debt until November 2012.

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Key Operating Metrics

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

	Three Months Ended						Six Months Ended
	June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(dollars in thousands, except motor fuel pricing and gross profit cents per gallon)
Revenue:
Merchandise sales	$	187,870		$	199,940		$	356,641		$	381,859
Motor fuel—retail		618,037			392,593			1,137,834			714,666
Motor fuel—wholesale		415,179			221,336			717,774			388,662
Other		9,074			9,297			18,617			18,697
Total revenue	$	1,230,160		$	823,166		$	2,230,866		$	1,503,884
Gross profit:
Merchandise	$	64,416		$	66,496		$	121,084		$	128,912
Motor fuel—retail		32,165			26,988			52,422			48,192
Motor fuel—wholesale		7,429			5,030			13,009			9,281
Other		8,535			9,302			17,638			18,602
Total gross profit	$	112,545		$	107,816		$	204,153		$	204,987
Adjusted EBITDA (2):
Retail	$	26,897		$	21,471		$	40,848		$	38,904
Wholesale		6,354			4,714			10,642			8,084
Other		(1,588	)		(1,334	)		(3,188	)		(2,820	)
Total Adjusted EBITDA	$	31,663		$	24,851		$	48,302		$	44,168
Retail merchandise margin		34.3	%		33.3	%		34.0	%		33.8	%
Merchandise same store sales growth		6.6	%		4.6	%		7.7	%		5.2	%
Average per retail store:
Merchandise sales	$	370.6		$	389.0		$	704.5		$	744.1
Motor fuel gallons		330.9			352.3			671.3			708.2
Motor fuel gallons sold:
Retail		165,113			177,887			334,426			357,299
Wholesale		124,329			125,832			238,439			248,301
Average retail price of motor fuel	$	3.74		$	2.21		$	3.40		$	2.00
Motor fuel gross profit cents per gallon (1):
Retail		19.5	¢		15.2	¢		15.7	¢		13.5	¢
Wholesale		6.0	¢		4.0	¢		5.5	¢		3.7	¢

(1) 2008 reflects reclassification of fuel vendor incentives from operating expense to fuel cost of sales.

(2) We define EBITDA as net income attributable to Susser Holdings Corporation before net interest expense, income taxes and depreciation, amortization and accretion. Adjusted EBITDA further adjusts EBITDA by excluding cumulative effect of changes in accounting principles, discontinued operations, non-cash stock based compensation expense, and certain other operating expenses that are reflected in our net income that we do not believe are indicative of our ongoing core operations, such as significant non-recurring transaction expenses and the gain or loss on disposal of assets and impairment charges. In addition, those expenses that we have excluded from our presentation of Adjusted EBITDA are also excluded in measuring our covenants under our revolving credit facility and the indenture governing our senior notes.

EBITDA and Adjusted EBITDA are important measures used by management in evaluating our business because:

• Adjusted EBITDA is used as a performance and liquidity measure under our existing revolving credit facility and the indenture governing our existing 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;

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• Adjusted EBITDA facilitates 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;

• Adjusted EBITDA is 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

• Adjusted EBITDA is used by our Board and management for determining certain management compensation targets and thresholds.

EBITDA and Adjusted EBITDA are not recognized terms under GAAP and do not purport to be alternatives to net income as measures of operating performance or to cash flows from operating activities as a measure of liquidity. EBITDA and Adjusted EBITDA 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 and Adjusted EBITDA do not reflect cash requirements for such replacements; and

• because not all companies use identical calculations, our presentation of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA:

	Three Months Ended					Six Months Ended
	June 29, 2008			June 28, 2009		June 29, 2008			June 28, 2009
	(in thousands)
Net income attributable to Susser Holdings Corporation	$	6,662		$	2,165	$	3,302		$	1,234
Depreciation, amortization, and accretion		10,345			10,549		21,081			20,512
Interest expense, net		9,490			9,456		19,352			19,089
Income tax expense		4,184			1,703		2,800			1,607
EBITDA		30,681			23,873		46,535			42,442
Non-cash stock based compensation		985			813		1,830			1,586
Loss on disposal of assets		53			106		151			158
Other miscellaneous		(56	)		59		(214	)		(18	)
Adjusted EBITDA	$	31,663		$	24,851	$	48,302		$	44,168

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

	Six Months Ended
	June 29, 2008			June 28, 2009
	(in thousands)
Net cash provided by operating activities	$	7,320		$	30,335
Changes in operating assets & liabilities		15,733			(7,294	)
Loss on disposal of assets		(151	)		(158	)
Non-cash stock based compensation expense		(1,830	)		(1,586	)
Noncontrolling interest		(23	)		(19	)
Deferred income tax		3,102			167
Amortization of debt premium		232			301
Income taxes		2,800			1,607
Interest expense, net		19,352			19,089
EBITDA		46,535			42,442
Non-cash stock based compensation		1,830			1,586
Loss on disposal of assets		151			158
Other miscellaneous		(214	)		(18	)
Adjusted EBITDA	$	48,302		$	44,168

Refer to Note 14 of the accompanying Notes to Consolidated Financial Statements for a description of our segment reporting. The following tables present a reconciliation of our segment operating income to EBITDA and Adjusted EBITDA:

	Retail Segment				Wholesale Segment					All Other						Total
	Six Months Ended				Six Months Ended					Six Months Ended						Six Months Ended
	June 29, 2008		June 28, 2009		June 29, 2008		June 28, 2009			June 29, 2008			June 28, 2009			June 29, 2008			June 28, 2009
	(in thousands)
Operating income (loss)	$	22,166	$	20,519	$	8,350	$	6,048		$	(5,253	)	$	(4,636	)	$	25,263		$	21,931
Depreciation, amortization, and accretion		18,572		18,221		2,254		2,042			255			249			21,081			20,512
Other miscellaneous		—		—		—		—			214			18			214			18
Noncontrolling interest		—		—		—		—			(23	)		(19	)		(23	)		(19	)
EBITDA		40,738		38,740		10,604		8,090			(4,807	)		(4,388	)		46,535			42,442
Non-cash stock based compensation		—		—		—		—			1,830			1,586			1,830			1,586
(Gain) loss on disposal of assets and impairment charge		110		164		38		(6	)		3			—			151			158
Other operating expenses		—		—		—		—			(214	)		(18	)		(214	)		(18	)
Adjusted EBITDA	$	40,848	$	38,904	$	10,642	$	8,084		$	(3,188	)	$	(2,820	)	$	48,302		$	44,168

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Second Quarter 2009 Compared to Second Quarter 2008

The following discussion of results for second quarter 2009 compared to second quarter 2008 compares the 13-week period of operations ended June 28, 2009 to the 13-week period of operations ended June 29, 2008. During 2008, we constructed or acquired 12 stores of which 6 opened after the second quarter of 2008 and therefore those stores did not contribute to results in the second quarter of 2008. In addition, one new store opened during the first quarter of 2009 and two new stores were opened during the second quarter of 2009.

Total Revenue. Total revenue for second quarter 2009 was $823.2 million, a decrease of $407.0 million, or 33.1%, from 2008. The decrease in total revenue was driven by a 36.5% decrease in retail fuel revenue and a 46.7% decrease in wholesale fuel revenue, both due to the lower price of motor fuel, as further discussed below.

Total Gross Profit. Total gross profit for second quarter 2009 was $107.8 million, a decrease of $4.7 million, or 4.2% over 2008. The decrease was primarily due to the decrease in fuel gross profit, as further discussed below, and slightly offset by the impact of the new stores constructed or acquired during 2008 and 2009 ($2.0 million of growth in gross profit) and other reasons as further described below.

Merchandise Sales and Gross Profit. Merchandise sales were $199.9 million for second quarter 2009, a $12.1 million, or 6.4% increase over 2008. Our performance was due to a 4.6% merchandise same store sales increase, accounting for $8.5 million of the increase, with the balance due to new stores built or acquired in 2008 and 2009. Merchandise same-store sales include food service sales but do not include motor fuel sales due to the volatility in the retail price of motor fuel. Key categories contributing to the merchandise same store sales increase were cigarettes, packaged drinks, beer, snacks and food service. Food service includes sales from restaurant operations, hot dogs, fountain beverages, coffee, and other prepared foods.

Merchandise gross profit was $66.5 million for the second quarter of 2009, a $2.1 million, or 3.2% increase over 2008, which was driven by the increase in merchandise sales, slightly offset by a decrease in gross profit margin from 34.3% to 33.3%. The decrease in gross margin was largely attributable to the Federal tax increase on cigarettes effective April 1, 2009, and to consumers trading down to lower margin items in categories such as packaged beverages and food service. Our reported merchandise margins do not include other income from services such as ATM’s, lottery, prepaid phone cards and car washes.

Retail Motor Fuel Sales, Gallons, and Gross Profit. Retail sales of motor fuel for 2009 were $392.6 million, a decrease of 36.5% from 2008, driven by a 41.0% decrease in the average retail price of motor fuel offset by a 7.7% increase in retail gallons sold. We sold an average of 0.4 million gallons per retail store, 6.5% higher than last year. Retail motor fuel gross profit decreased by $5.2 million or 16.1% over 2008 due to a decrease in the gross profit per gallon, partly offset by the increase in gallons sold. The average retail fuel margin decreased from 19.5 cents per gallon to 15.2 cents per gallon for 2008 and 2009, respectively. This reduction in fuel margin decreased Retail fuel gross profit by $7.7 million. After deducting credit card fees, the net margin decreased from 15.2 cents per gallon to 11.5 cents per gallon.

Wholesale Motor Fuel Sales, Gallons, and Gross Profit. Wholesale motor fuel revenues to third parties for the second quarter of 2009 were $221.3 million, a 46.7% decrease over 2008. The decrease was driven by a 47.3% decrease in the wholesale selling price per gallon slightly offset by a 1.2% increase in gallons sold. Wholesale motor fuel gross profit of $5.0 million decreased $2.4 million or 32.3% from 2008, due to a 33.1% decrease in the gross profit per gallon from 6.0 to 4.0 cents per gallon (responsible for a $2.5 million decrease), partly offset by the increase in gallons.

Other Revenue and Gross Profit. Other revenue of $9.3 million for second quarter 2009 increased by $ 0.2 million or 2.5% from 2008, with a 9.0% increase in associated gross profit.

Personnel Expense. For the second quarter of 2009, personnel expense increased $2.3 million or 6.8% over 2008. Of the increase in personnel expense, $1.1 million was attributable to the new stores acquired and constructed during 2008 and 2009.

General and Administrative Expenses. For second quarter 2009, general and administrative expenses increased by $0.2 million, or 2.2% from 2008.

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Other Operating Expenses. Other operating expenses decreased by $1.0 million or 3.2% over 2008. The decrease was primarily due to utility and credit card expense reductions of $2.2 million and $0.6 million, respectively, from 2008, offset by an increase in property tax and insurance expense of $0.5 million and $0.3 million, respectively, as well as increased costs related to the new stores.

Rent Expense. Rent expense for second quarter 2009 of $9.0 million was $0.4 million or 4.1% higher than 2008 due primarily to rent expense on additional leased stores.

Depreciation, Amortization, and Accretion. Depreciation, amortization and accretion expense for second quarter 2009 of $10.5 million was up $0.2 million or 2.0% from 2008, related to an increase in depreciable assets.

Income from Operations. Income from operations for second quarter 2009 was $13.4 million, compared to $20.3 million for 2008. The decrease is primarily attributed to a $10.2 million decrease in fuel gross profit resulting from lower retail and wholesale fuel margins, as discussed above.

Income Tax. The income tax expense accrued for second quarter 2009 was $1.7 million, which consisted of $0.5 million of expense attributable to the Texas margin tax and $1.2 million of income tax expense related to federal and state income tax. The income tax expense accrued for second quarter 2008 was $4.2 million, which consisted of $0.4 million of expense attributable to the Texas margin tax and $3.8 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 income attributable to Susser Holdings Corporation. We recorded net income attributable to Susser Holdings Corporation for the second quarter 2009 of $2.2 million, compared to net income attributable to Susser Holdings Corporation of $6.7 million for 2008. The decrease is primarily due to the same factors impacting operating income, as described above.

Adjusted EBITDA.Adjusted EBITDA for second quarter 2009 was $24.9 million, a decrease of $6.8 million, or 21.5% compared to 2008. Retail segment Adjusted EBITDA of $21.5 million decreased by $5.4 million, or 20.2% compared to 2008, primarily due to lower fuel gross profit partly offset by higher merchandise gross profit. Wholesale segment Adjusted EBITDA of $4.7 million decreased by $1.6 million, or 25.8% from 2008, primarily resulting from the lower fuel margin. Other segment Adjusted EBITDA reflects net expenses of $1.3 million for the quarter, compared to $1.6 million for the same period in 2008.

First Half 2009 Compared to First Half 2008

The following discussion of results for first half 2009 compared to first half 2008 compares the 26-week period of operations ended June 28, 2009 to the 26-week period of operations ended June 29, 2008. 2009 results partially reflect the three retail stores constructed in the first half of 2009, as well as full results from the 12 stores added in 2008, six of which were added during the first half of 2008.

Total Revenue. Total revenue for first half 2009 was $1,503.9 million, a decrease of $727.0 million, or 32.6%, over 2008. The decrease in total revenue was driven by a 37.2% decrease in retail fuel revenue and a 45.9% decrease in wholesale fuel revenue, partly offset by an increase in merchandise sales of 7.1%, as further discussed below.

Total Gross Profit. Total gross profit for first half 2009 was $205.0 million, an increase of $0.8 million, or 0.4%, over 2008. Contributing to the increase were the impact of the new stores constructed or acquired during 2008 and 2009 ($4.2 million of growth in gross profit) and increased merchandise gross profit, partly offset by lower fuel margins, as further described below.

Merchandise Sales and Gross Profit. Merchandise sales were $381.9 million for the first half of 2009, a $25.2 million, or 7.1%, increase over 2008. Our performance was due to a 5.2% merchandise same store sales increase, accounting for $18.6 million of the increase, with the balance due to new stores built or acquired in 2008 and 2009. Merchandise same-store sales include food service sales but do not include motor fuel sales due to the volatility in the

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retail price of motor fuel. Key categories contributing to the same store sales increase were packaged drinks, cigarettes, beer, food service, snacks, and candy. Food service includes sales from restaurant operations, hot dogs, fountain beverages, coffee, and other prepared foods.

Merchandise gross profit was $128.9 million for the first half of 2009, a $7.8 million, or 6.5%, increase over 2008, which was driven by the increase in merchandise sales slightly offset by a decrease in gross profit margin from 34.0% to 33.8%. Our reported merchandise margins do not include other income from services such as ATM’s, lottery, prepaid phone cards and car washes.

Retail Motor Fuel Sales, Gallons and Gross Profit. Retail sales of motor fuel for 2009 were $714.7 million, a decrease of 37.2% from 2008, driven by a 41.2% decrease in the average retail price of motor fuel partly offset by a 6.8% increase in retail gallons sold. We sold an average of 0.7 million gallons per retail store, which is a 5.5% increase to 2008. Retail motor fuel gross profit decreased by $4.2 million or 8.1% over 2008, due to a 14.0% decrease in retail fuel margins (accounting for a $7.8 million decrease in gross profit), partly offset by an increase in gallons sold.

Wholesale Motor Fuel Sales, Gallons and Gross Profit. Wholesale motor fuel revenues to third parties for the first half of 2009 were $388.7 million, a 45.9% decrease over 2008. The decrease was driven by a 48.0% decrease in the wholesale selling price per gallon partly offset by a 4.1% increase in gallons sold. Wholesale motor fuel gross profit of $9.3 million decreased $3.7 million or 28.7% from 2008 due to a 31.5% decrease in the gross profit per gallon from 5.5 cents to 3.7 cents per gallon (accounting for a $4.3 million decrease in gross profit), partly offset by the increase in gallons sold.

Other Revenue and Gross Profit. Other revenue of $18.7 million for the first half of 2009 increased 0.4% from 2008, with a 5.5% increase in associated gross profit.

Personnel Expense. For the first half of 2009, personnel expense was $72.3 million, an increase of $7.4 million, or 11.5%, over 2008. Of the increase in personnel expense, $2.1 million was attributable to the new stores acquired and constructed during 2008 and 2009. The balance is primarily attributed to improved staffing levels in our West Texas stores, increased pay due to the minimum wage increase in July 2008 and increased staff tenure and to increased health care costs.

General and Administrative Expenses. For the first half of 2009, general and administrative expenses were $17.1 million compared to $17.1 million in 2008. We began to realize the full synergies in G&A costs from the Town & Country integration in the second half of 2008.

Other Operating Expenses. Other operating expenses decreased by $3.6 million or 6.2% over 2008. Credit card costs of $11.4 million, or 3.2 cents per gallon, represent a decrease of $2.2 million from 2008. Utility costs also decreased $2.0 million compared to 2008.

Rent Expense. Rent expense for the first half of 2009 of $18.0 million was $1.0 million or 5.6% higher than 2008 due primarily to rent expense on additional leased stores.

Depreciation, Amortization and Accretion. Depreciation, amortization and accretion expense for the first half 2009 of $20.5 million was down $0.6 million or 2.7% from 2008 partially related to adjustments of $0.3 million recorded during the first quarter of 2009 to the amortization of the leasehold disadvantage related to the final purchase price allocation of the Town & Country acquisition.

Income from Operations. Income from operations for the first half of 2009 was $21.9 million, compared to $25.3 million for 2008. The decrease is attributed to a $12.1 million decrease in fuel gross profit resulting from lower retail and wholesale margins, partly offset by increased merchandise gross profit and fuel gallons, and changes in operating expenses, as described above.

Interest Expense, Net. Net interest expense for the first half of 2009 was $19.1 million, a decrease of $0.3 million from 2008 primarily due to lower amounts outstanding under the revolving credit facility and lower interest rates on our variable-rate debt.

Income Tax. The income tax expense accrued for first half 2009 was $1.6 million, which consisted of $1.0

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million of expense attributable to the Texas margin tax and $0.6 million of income tax expense related to federal and state income tax. The income tax expense accrued for first half 2008 was $2.8 million, which consisted of $1.0 million of expense attributable to the Texas margin tax and $1.8 million of income tax benefit 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 Income attributable to Susser Holdings Corporation. We recorded net income attributable to Susser Holdings Corporation for the first half of 2009 of $1.2 million, compared to net income attributable to Susser Holdings Corporation of $3.3 million for 2008. The decrease is primarily due to the same factors impacting operating income, as described above.

Adjusted EBITDA.Adjusted EBITDA for the first half 2009 was $44.2 million, a decrease of $4.1 million, or 8.6%, compared to 2008. Retail segment Adjusted EBITDA of $38.9 million decreased by $1.9 million, or 4.8% compared to 2008, primarily due to lower fuel margins partly offset by higher merchandise gross profits. Wholesale segment Adjusted EBITDA of $8.1 million decreased by $2.6 million, or 24.0%, from 2008 primarily due to lower fuel margins. Other segment Adjusted EBITDA reflects net expenses of $2.8 million for the six months, compared to $3.2 million for the same period in 2008.

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 third quarter.

Cash flows from operations were $30.3 million and $7.3 million for the first six months of 2009 and 2008, respectively. The change in our cash provided from operating activities for the respective periods was primarily attributable to the changes in working capital, which were impacted in 2008 by rapidly rising fuel costs. 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 $14.1 million of cash and cash equivalents on hand at June 28, 2009 compared to $14.4 million at June 29, 2008, and $8.3 million at December 28, 2008.

Capital Expenditures. Capital expenditures, before any sale/leasebacks and asset dispositions, were $23.4 million and $37.3 million during the first half of 2009 and 2008, respectively. We opened two new retail stores during second quarter 2009 bringing our store count to 515 as of June 28, 2009. We opened two additional stores during the third quarter of 2009 as of July 27, 2009, and currently have three additional stores under construction. We completed the sale-leaseback of one retail store during the second quarter for $2.8 million.

During the second quarter our wholesale division added seven dealers and terminated supply at six dealer sites. We have recently agreed to acquire 25 convenience stores in Texas and Louisiana, the majority of which we expect to sell and sublease to dealers in our wholesale segment. The acquisition includes 24 leaseholds and one fee property. Our wholesale segment currently supplies fuel to 11 of these 25 sites. Closing is expected to be completed by the end of August and to be funded with cash.

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Following is a summary of our recent operating site additions and closures by segment:

	Three Months Ended June 28, 2009		Six Months Ended June 28, 2009
Retail stores:
Number at beginning of period	513		512
New stores	2		3
Number at end of period	515		515
Wholesale dealer locations:
Number at beginning of period	371		372
New locations	7		8
Closed locations	(6	)	(8	)
Number at end of period	372		372

During fiscal 2009, we plan to invest approximately $50 to $70 million (net of anticipated lease financing) in new retail stores, new dealer projects and maintenance, and upgrade of our existing facilities. We plan to finance our capital spending plan with cash flow from operations, cash balances, borrowings under the revolving credit facility, long-term mortgage debt and additional lease financing. We currently expect we will be able to access financing for a portion of our new store program. However, if we are not able to obtain sale/leaseback, long-term mortgage debt or other financing during 2009, or if our actual cash flows from operations are lower than expected, we may defer a portion of our new store expansion program, our planned rebranding of the Town & Country stores, or other discretionary capital spending.

Cash Flows from Financing Activities. At June 28, 2009, our outstanding debt was $400.9 million, excluding $3.5 million unamortized issuance premium.

Credit Facilities.On November 13, 2007, as part of the TCFS Acquisition, we, as parent guarantor, and our indirect wholly-owned subsidiary Susser Holdings, L.L.C., as borrower (the “Borrower”), entered into a new credit agreement with a syndicate of financial institutions providing for a five year revolving credit facility in an aggregate principal amount of up to $90 million, referred to as the “revolving credit facility,” and a five year term loan facility in the aggregate principal amount of $105 million, referred to as the “term loan facility.” We and each of our 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” and (ii) Susser Company, Ltd.) are, and will be, guarantors under each of the facilities. In May 2008 we increased the aggregate commitments under the revolving credit facility to $120 million, which expires November 2012, to provide additional capacity on the working capital line in the face of rapidly rising fuel costs. When the cost of fuel increases, our working capital requirements tend to increase, but we also have related increases in trade receivables and fuel inventory balances which provide additional borrowing base to support a higher revolving credit facility.

Availability under the revolving credit facility 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 35% of the aggregate borrowing base amount, minus (d) such reserves as the administrative agent of the revolving credit facility 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) 85% of gross accounts receivable plus 60% of gross inventory.

As of June 28, 2009, we had $3.1 million outstanding under the revolving credit facility and $22.1 million in standby letters of credit, which includes a $10.0 million letter of credit held in escrow related to the TCFS Acquisition that will be eligible to be drawn in November 2009, net of any settled or pending indemnity claims. Our borrowing base in effect at June 28, 2009, allowed a maximum borrowing, including outstanding letters of credit, of $97.7 million. This reduction in our borrowing base from the full $120 million commitment reflects the lower fuel prices at quarter-end compared to the same period in 2008, which reduced our trade receivable and fuel inventory balances. The reduction in fuel prices also tends to reduce our working capital requirements, and therefore our need to borrow against the revolver. Our unused availability on the revolver at June 28, 2009 was $72.5 million.

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During the first quarter of 2009, the Company entered into interest rate swaps on $70 million notional principal for a three-year term. The swaps exchange a floating to fixed rate against our variable- rate term loan, and are accounted for as cash flow hedges. For more information, see Note 7 in the accompanying Notes to Consolidated Financial Statements.

Senior Notes. On December 21, 2005, Susser Holdings, L.L.C. and a subsidiary, Susser Finance Corporation (which we refer to, collectively, as the “issuers”), sold $170 million of 10 ⁵/8% senior unsecured notes due, 2013 (referred to as the “original notes”). Proceeds from the sale of the original notes were used to fund the 2005 recapitalization, repay existing indebtedness and pay related fees and expenses. A portion of the proceeds from the IPO were used to redeem $50 million of the original notes, plus accrued interest and premium thereon on November 24, 2006.

The issuers issued and sold, on November 13, 2007, as part of the TCFS Acquisition, an additional $150 million in aggregate principal amount, and on June 23, 2008, an additional $30 million in aggregate principal amount, of 10 5/8% senior notes, due 2013 (which we refer to, alone, as the “additional notes” and together with the original notes, as the “senior notes”). The additional notes were issued under, and are governed by the terms of, the indenture, dated as of December 21, 2005, governing the original notes (referred to as the “indenture”). Under the indenture, the original notes and the additional notes are subject to the same interest payment, ranking, redemption and change of control provisions, covenants and transfer restrictions and pay interest semiannually in arrears on June 15 and December 15 of each year. The senior notes mature on December 15, 2013 and are guaranteed by us and each existing and future domestic subsidiary of the issuers with the exception of one non-wholly-owned subsidiary.

We incurred approximately $7.7 million in total costs associated with the issuance of the additional senior notes, which were deferred and are being amortized to interest expense over the remaining life of the senior notes. We are also amortizing $4.4 million of issuance premiums as a credit to interest expense over the remaining life of the senior notes.

For more information regarding the terms of the revolving credit facility, the term loan facility and the senior notes, please see Note 7 in the accompanying Notes to Consolidated Financial Statements.

Long Term Liquidity.We expect that our cash flows from operations, cash on hand, lease 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 refinance 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 term loan facilities, 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 liquidity.

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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
	June 28, 2009
	Fee	Leased
Operating sites:
Retail	250	265
Wholesale	43	15
Total	291	282
Office locations	7	3
Properties currently being developed	5	—
Properties held for future development	21	—
Income producing properties	6	1
Surplus properties	38	7

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.

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Quarterly Results of Operations and Seasonality

The following table sets forth certain unaudited financial and operating data for each of the last ten 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.

	2007												2008												2009
	(dollars and gallons in thousands)
	1st QTR			2nd QTR			3rd QTR			4th QTR (a)			1st QTR			2nd QTR			3rd QTR			4th QTR			1st QTR			2nd QTR
Merchandise sales	$	93,365		$	105,925		$	108,227		$	136,701		$	168,771		$	187,870		$	189,272		$	183,944		$	181,919		$	199,940
Motor fuel sales:
Retail		224,685			297,751			291,413			397,902			519,797			618,037			619,692			393,201			322,072			392,593
Wholesale		204,430			282,829			268,252			279,958			302,595			415,179			396,952			208,769			167,327			221,336
Other income		6,170			6,290			6,130			7,334			9,543			9,074			8,123			9,064			9,400			9,297
Total revenue		528,650			692,795			674,022			821,895			1,000,706			1,230,160			1,214,039			794,978			680,718			823,166
Merchandise gross profit		29,960			34,043			35,921			44,642			56,668			64,416			65,966			63,592			62,416			66,496
Motor fuel gross profit(b):
Retail		12,167			18,414			17,309			19,698			20,257	��		32,165			36,402			31,732			21,204			26,988
Wholesale		4,321			6,339			7,553			7,440			5,580			7,429			8,888			9,037			4,251			5,030
Other gross profit		6,046			5,831			5,885			7,030			9,103			8,535			7,791			9,087			9,300			9,302
Total gross profit		52,494			64,627			66,668			78,810			91,608			112,545			119,047			113,448			97,171			107,816
Income from operations		780			9,412			7,944			8,122			4,972			20,291			21,137			19,499			8,541			13,390
Net income (loss) attributable to Susser Holdings Corporation	$	(2,401	)	$	6,274		$	4,841		$	7,538		$	(3,360	)	$	6,662		$	6,862		$	6,313		$	(931	)	$	2,165
Earnings (loss) per common share attributable to Susser Holdings Corporation:
Basic	$	(0.14	)	$	0.38		$	0.29		$	0.45		$	(0.20	)	$	0.39		$	0.41		$	0.37		$	(0.05	)	$	0.13
Diluted	$	(0.14	)	$	0.37		$	0.29		$	0.44		$	(0.20	)	$	0.39		$	0.40		$	0.37		$	(0.05	)	$	0.13
Merchandise margin, net		32.1	%		32.1	%		33.2	%		32.7	%		33.6	%		34.3	%		34.9	%		34.6	%		34.3	%		33.3	%
Fuel gallons:
Retail		101,793			106,624			108,874			139,236			169,313			165,113			163,399			179,483			179,412			177,887
Wholesale		111,585			118,682			118,767			116,152			114,110			124,329			122,318			125,759			122,469			125,832
Motor fuel margin (b):
Retail (c)		12.0	¢		17.3	¢		15.9	¢		14.1	¢		12.0	¢		19.5	¢		22.3	¢		17.7	¢		11.8	¢		15.2	¢
Wholesale		3.9	¢		5.3	¢		6.4	¢		6.4	¢		4.9	¢		6.0	¢		7.3	¢		7.2	¢		3.5	¢		4.0	¢

(a) Includes 48 days of Town & Country operations.

(b) Reflects reclassification of fuel vendor incentives from operating expense to fuel cost of sales in 2007 and 2008.

(c) Before deducting credit card, fuel maintenance and other fuel related expenses.

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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 December 28, 2008. 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.

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. At June 28, 2009, we had $3.1 million outstanding on the credit facility. Our term loan facility, of which $97.8 million was outstanding at June 28, 2009, also bears interest at variable rates. The annualized effect of a one percentage point change in floating interest rates on our variable rate debt obligations at June 28, 2009 would be to change interest expense by approximately $1.0 million.

Our primary exposure relates to:

• Interest rate risk on short-term borrowings;

• Our ability to pay or refinance long-term borrowings at maturity at market rates; 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. During the first quarter of 2009, we entered into interest rate swaps on $70 million notional principal for a three-year term. The swap exchanges a floating to fixed rate against our variable-rate term loan.

We also purchase motor fuel on the Gulf Coast and transport it to West Texas 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 pipeline inventory.

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 Rules 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

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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 second quarter of 2009 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 December 28, 2008, 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. Submission of Matters to a Vote of Security Holders

On May 19, 2009, we held our Annual Meeting of Stockholders, during which our stockholders:

(1) Re-elected three nominees to serve as directors each for a term of three years or until his successor is duly elected and qualified. The votes were cast as follows:

Name	Votes For	Votes Withheld
Bruce W. Krysiak	12,992,798	1,411,095
Sam J. Susser	14,046,795	357,098
David P. Engel	14,197,199	206,694

(2) Ratified the appointment of Ernst & Young LLP as our independent public accountants for fiscal 2009. The votes were cast as follows:

	Votes For	Votes Against	Abstentions
Ratification of Ernst & Young LLP	14,318,674	64,523	20,696

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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: August 7, 2009
	By	/s/ Mary E. Sullivan
		Mary E. Sullivan
		Executive Vice President and Chief Financial 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.†

† Filed herewith.

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