Susser (SUSS) 10-Q 2010 Q1 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: April 4, 2010

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	17,280,227 SHARES
(Class)	(Outstanding at May 10, 2010)

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	16
Item 3. Quantitative and Qualitative Disclosures About Market Risk	28
Item 4. Controls and Procedures	29
PART II – OTHER INFORMATION
Item 1. Legal Proceedings	30
Item 1A. Risk Factors	30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3. Defaults Upon Senior Securities	30
Item 4. (Removed and Reserved)	30
Item 5. Other Information	30
Item 6. Exhibits	30

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Susser Holdings Corporation

Consolidated Balance Sheets

	January 3, 2010			April 4, 2010
				unaudited
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	17,976		$	20,199
Accounts receivable, net of allowance for doubtful accounts of $903 at January 3, 2010 and $962 at April 4, 2010		65,510			70,942
Inventories, net		78,788			79,272
Other current assets		9,507			11,335
Total current assets		171,781			181,748
Property and equipment, net		408,771			401,187
Other assets:
Goodwill		242,295			242,295
Intangible assets, net		33,144			32,318
Other noncurrent assets		17,027			16,695
Total other assets		292,466			291,308
Total assets	$	873,018		$	874,243
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	129,425		$	146,680
Accrued expenses and other current liabilities		28,632			32,589
Current maturities of long-term debt		10,545			11,011
Deferred purchase price – TCFS acquisition		5,180			5,180
Total current liabilities		173,782			195,460
Long-term debt		384,574			391,236
Revolving line of credit		25,800			5,910
Deferred gain, long-term portion		33,786			33,786
Deferred tax liability, long-term portion		28,846			25,146
Other noncurrent liabilities		15,812			16,818
Total long-term liabilities		488,818			472,896
Commitments and contingencies:
Shareholders’ equity:
Susser Holdings Corporation shareholders’ equity:
Common stock, $.01 par value; 125,000,000 shares authorized; 17,158,717 issued and 17,141,393 outstanding as of January 3, 2010; 17,166,919 issued and 17,138,469 outstanding as of April 4, 2010		170			171
Additional paid-in capital		183,880			184,622
Retained earnings		25,956			20,971
Accumulated other comprehensive loss		(358	)		(658	)
Total Susser Holdings Corporation shareholders’ equity		209,648			205,106
Noncontrolling interest		770			781
Total shareholders’ equity		210,418			205,887
Total liabilities and shareholders’ equity	$	873,018		$	874,243

See accompanying notes.

1

Susser Holdings Corporation

Consolidated Statements of Operations

Unaudited

	Three Months Ended
	March 29, 2009			April 4, 2010
	(dollars in thousands; except per share amounts)
Revenues:
Merchandise sales	$	181,919		$	191,038
Motor fuel sales		489,399			736,814
Other income		9,490			10,273
Total revenues		680,808			938,125
Cost of sales:
Merchandise		119,503			128,655
Motor fuel		463,944			711,495
Other		100			354
Total cost of sales		583,547			840,504
Gross profit		97,261			97,621
Operating expenses:
Personnel		35,387			36,007
General and administrative		8,864			8,541
Other operating		25,441			29,858
Rent		9,013			10,051
Loss on disposal of assets		52			264
Depreciation, amortization, and accretion		9,963			11,208
Total operating expenses		88,720			95,929
Income from operations		8,541			1,692
Other income (expense):
Interest expense, net		(9,633	)		(9,688	)
Other miscellaneous		77			4
Total other expense, net		(9,556	)		(9,684	)
Loss before income taxes		(1,015	)		(7,992	)
Income tax benefit		96			3,018
Net loss		(919	)		(4,974	)
Less: Net income attributable to noncontrolling interests		12			11
Net loss attributable to Susser Holdings Corporation	$	(931	)	$	(4,985	)
Net loss per share attributable to Susser Holdings Corporation:
Basic	$	(0.05	)	$	(0.29	)
Diluted	$	(0.05	)	$	(0.29	)
Weighted average shares outstanding:
Basic		16,924,522			16,994,090
Diluted		16,924,522			16,994,090

See accompanying notes.

2

Susser Holdings Corporation

Consolidated Statements of Cash Flows

Unaudited

	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Cash flows from operating activities:
Net loss	$	(919	)	$	(4,974	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, amortization, and accretion		9,963			11,208
Loss on disposal of property		52			264
Non–cash stock based compensation		773			728
Deferred income tax		(407	)		(2,102	)
Amortization of debt premium		(149	)		(164	)
Changes in operating assets and liabilities:
Receivables		(3,908	)		(5,432	)
Inventories		(3,889	)		(483	)
Other current assets		94			(3,311	)
Intangible assets, net		362			742
Other noncurrent assets		119			(126	)
Accounts payable		11,680			17,253
Accrued liabilities		(1,729	)		3,957
Other noncurrent liabilities		(320	)		410
Net cash provided by operating activities		11,722			17,970
Cash flows from investing activities:
Capital expenditures		(6,275	)		(9,206	)
Proceeds from disposal of property and equipment		12			21
Proceeds from sale/leaseback transactions		—			5,836
Net cash used in investing activities		(6,263	)		(3,349	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			10,000
Change in notes receivable		(87	)		337
Payments on long-term debt		(1,357	)		(2,708	)
Revolving line of credit, net		2,240			(19,890	)
Loan origination costs		(227	)		(153	)
Proceeds from issuance of equity		68			16
Net cash provided by (used in) financing activities		637			(12,398	)
Net increase in cash		6,096			2,223
Cash and cash equivalents at beginning of year		8,284			17,976
Cash and cash equivalents at end of period	$	14,380		$	20,199

See accompanying notes.

3

Susser Holdings Corporation

Notes to Consolidated Financial Statements

Unaudited

1. Organization and Principles of Consolidation

The consolidated financial statements are composed of Susser Holdings Corporation (“Susser” or the “Company”), a Delaware corporation, and its consolidated subsidiaries, which operate convenience stores and distribute motor fuels in Texas, New Mexico, Oklahoma and Louisiana. The Company was formed in May 2006, and in October 2006 completed an initial public offering (IPO). Susser, through its subsidiaries and predecessors, has been acquiring, operating, and supplying motor fuel to service stations and convenience stores since the 1930’s.

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. The Company’s primary operations are conducted by the following consolidated subsidiaries:

• Stripes LLC (“Stripes”), a Texas Limited Liability Company, operates convenience stores located in Texas, New Mexico, and Oklahoma.

• Susser Petroleum Company LLC (“SPC”), a Texas Limited Liability Company, distributes motor fuels primarily in Texas, New Mexico, Oklahoma and Louisiana. SPC is a wholly owned subsidiary of Stripes.

The Company also offers environmental, maintenance, and construction management services to the petroleum industry (including its own sites) through its subsidiary, Applied Petroleum Technologies, Ltd. (“APT”), a Texas limited partnership. Two wholly owned subsidiaries, Susser Holdings, L.L.C. and Susser Finance Corporation, are the issuers of the $300 million of senior notes outstanding at April 4, 2010, but do not conduct any operations (See Note 8). 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 2009 refer to the 53-week period ended January 3, 2010. All references to the first quarter of 2009 and 2010 refer to the 13-week periods ended March 29, 2009 and April 4, 2010, respectively. Stripes and APT follow the same accounting calendar as the Company. SPC uses 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 April 4, 2010 and for the three months ended March 29, 2009 and April 4, 2010 are unaudited. Pursuant to Regulation S-X, certain information and note disclosures normally included in annual financial statements have been condensed or omitted. The information furnished reflects all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented, and which are of a normal, recurring nature.

Our results of operations for the three months ended March 29, 2009 and April 4, 2010 are not necessarily indicative of results to be expected for the full fiscal year. Our business is seasonal and we generally experience higher levels of revenues during the summer months than during the winter months.

The interim consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2010.

Certain prior year balances have been reclassified for comparative purposes.

4

2. New Accounting Pronouncements

FASB ASU No. 2010-006.

In January 2010, the FASB issued ASU No. 2010-06,Fair Value Measurements and Disclosures (Topic 820) – Improving Disclosures about Fair Value Measurements.This guidance will require reporting entities to provide information about movements of assets among Levels 1 and 2 of the three-tier fair value hierarchy established by ASC 820 and provide a reconciliation of purchases, sales, issuance, and settlements of financial instruments valued with a Level 3 method, which is used to price the hardest to value instruments. Entities will have to provide fair value measurement disclosures for each class of financial assets and liabilities. The ASU was generally effective for interim and annual reporting periods beginning after December 15, 2009; however the requirement to disclose separately purchases, sales, issuances and settlements in the Level 3 reconciliation are effective for fiscal years beginning after December 15, 2010 (and for interim period within such years). Our adoption of the applicable sections of this ASU did not have a material impact on our financial statements.

3. Subsequent Events

In preparing the accompanying unaudited condensed consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after April 4, 2010, up until the issuance of these financial statements.

On May 7, 2010 the Company closed on a private placement of $425 million of senior unsecured notes (the “2016 Senior Notes”) with a coupon rate of 8.5% at a price of 98.845% of the principal amount to yield 8.75%. The new notes mature May 15, 2016 and are callable beginning May 15, 2013 at specified premiums. On April 27, 2010, the Company delivered a conditional notice of optional redemption to the holders of the outstanding 10 5/8% 2013 Notes. Pursuant to the redemption, the Company will redeem $300 million in aggregate principal of the 2013 Notes for a price per $1,000 of $1,053.13, plus accrued and unpaid interest to the redemption date, which is expected to be May 27, 2010.

Concurrent with this offering of notes, the Company prepaid the $89.3 million outstanding term loan balance and entered into an amended and restated revolving credit facility which extends the maturity date of the revolving credit facility until May 2014.

4. Accounts Receivable

Accounts receivable consisted of the following:

	January 3, 2010			April 4, 2010
	(in thousands)
Accounts receivable, trade	$	49,954		$	55,164
Receivable from state reimbursement funds		1,212			1,153
Vendor receivables for rebates, branding and others		6,103			5,917
ATM fund receivables		5,530			6,621
Notes receivable, short term		325			300
Other receivables		3,289			2,749
Allowance for uncollectible accounts, trade		(609	)		(664	)
Allowance for uncollectible accounts, environmental		(294	)		(298	)
Accounts receivables, net	$	65,510		$	70,942

5

5. Inventories

Inventories consisted of the following:

	January 3, 2010			April 4, 2010
	(in thousands)
Merchandise	$	47,567		$	47,197
Fuel-retail		22,515			22,878
Fuel-wholesale consignment		2,908			2,884
Lottery		1,928			1,905
Equipment and maintenance spare parts		4,534			5,209
Allowance for inventory, shortage and obsolescence		(664	)		(801	)
Total	$	78,788		$	79,272

6. Property, Plant and Equipment

Property and equipment consisted of the following:

	January 3, 2010		April 4, 2010
	(in thousands)
Land	$	125,806	$	126,724
Buildings and leasehold improvements		215,793		217,277
Equipment		175,910		176,850
Construction in progress		11,239		10,843
		528,748		531,694
Less accumulated depreciation		119,977		130,507
Total	$	408,771	$	401,187

7. 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. The annual impairment test is performed as of the first day of the fourth quarter of the fiscal year. At January 3, 2010 and April 4, 2010, we had $242.3 million of goodwill recording in conjunction with past business combinations. The 2009 impairment analysis indicated no impairment in goodwill. As of April 4, 2010 we evaluated potential impairment indicators pursuant to the requirements of ASC 350-20-35-30. We believe no indicators of impairment occurred during the first quarter of 2010, and believe the assumptions used in the analysis performed in 2009 are still relevant and indicative of our current operating environment. As a result, no impairment was recorded to goodwill during the first quarter of 2010 and no additions were recorded during this period.

In accordance with ASC 350 “Intangibles – Goodwill and Other”, 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 eleven 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 January 3, 2010 and April 4, 2010:

6

	January 3, 2010						April 4, 2010
	Gross Carrying Amount		Accumulated Amortization		Net Amount		Gross Carrying Amount		Accumulated Amortization		Net Amount
	(in thousands)
Unamortized
Trade name	$	615	$	—	$	615	$	615	$	—	$	615
Franchise rights		389		—		389		389		—		389
Liquor licenses		11,600		—		11,600		11,600		—		11,600
Amortized
Supply agreements		8,772		3,322		5,450		8,912		3,446		5,466
Favorable lease arrangements, net		2,622		2,368		254		2,497		2,292		205
Loan origination costs		18,367		7,623		10,744		18,520		8,397		10,123
Trade names		5,756		1,761		3,995		5,756		1,908		3,848
Other		520		423		97		520		448		72
Total	$	48,641	$	15,497	$	33,144	$	48,809	$	16,491	$	32,318

8. Long -Term Debt

Long-term debt consisted of the following:

	January 3, 2010		April 4, 2010
	(in thousands)
10  5/8% senior unsecured notes due 2013	$	300,000	$	300,000
Term loan facility, bearing interest at LIBOR plus applicable margin (2.23% at January 3, 2010 and 2.74% at April 4, 2010), principal due in quarterly installments through November 13, 2012		91,875		89,250
Revolving credit agreement, bearing interest at Prime or LIBOR plus applicable margin, (3.25% at January 3, 2010 and 3.75% at April 4, 2010)		25,800		5,910
Other notes payable		90		10,007
Unamortized premium		3,154		2,990
Total debt		420,919		408,157
Less: current maturities		10,545		11,011
Long–term debt, net of current maturities	$	410,374	$	397,146

The fair value of debt as of April 4, 2010, is estimated to be approximately $417.9 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 other notes payable.

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 due December 15, 2013 (the “2013 Notes”). The 2013 Notes pay interest semiannually in arrears on June 15 and December 15 of each year, commencing on June 15, 2006, until maturity.

7

The 2013 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 2013 Notes also contain certain financial covenants. On November 24, 2006, the Company redeemed $50.0 million of the 2013 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 2013 Notes and on June 23, 2008, the Company issued an additional $30.0 million 2013 Notes.

The $300.0 million 2013 Notes are redeemable at April 4, 2010, at 105.313% (expressed as a percentage of principal amount) plus accrued and unpaid interest and liquidated damages, if any. The redemption price steps down to 102.656% on or after December 15, 2010, and to 100.000% on or after December 15, 2011.

See Note 3 for a discussion of the new Senior Unsecured Notes issued May 7, 2010, and redemption of the existing 2013 Notes.

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”).

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 April 4, 2010, we had $5.9 million outstanding under the revolving credit facility and $12.2 million in standby letters of credit. Our borrowing base in effect at April 4, 2010 allowed a maximum borrowing, including outstanding letters of credit, of $103.0 million. Our unused availability on the revolver at April 4, 2010 was $84.9 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 0.5% 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 April 4, 2010.

The Company entered into an amended and restated revolving credit facility on May 7, 2010, which extended the maturity date until May 2014. As a result, the Company prepaid the $89.3 million outstanding term loan balance (See Note 3).

8

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. 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.

ASC 820 “Fair Value Measurements and Disclosures” prioritizes the inputs used in measuring fair value into the following hierarchy:

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;

Level 3 Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

From time to time, the Company enters into interest rate swaps to either reduce the impact of changes in interest rates on its floating rate long-term debt or to take advantage of favorable variable interest rates compared to its fixed rate long-term debt in order to manage interest rate risk exposure. 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 swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk. The Company recognized $0.3 million in additional interest expense (effective portion) during the first three months of 2010 associated with this interest rate swap and recognized a $0.5 million 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 (net of tax effect) into net income as additional interest expense during the second quarter of 2010, due to the cancellation of the term loan on May 7, 2010. At this point the associated swaps will no longer qualify as cash flow hedges. At April 4, 2010, these interest rate swaps had a market value of ($1.0) million 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 January 3, 2010, the Company held fuel futures contracts with a fair value of ($174,000), (22 contracts representing 0.9 million gallons). At April 4, 2010, the Company held fuel futures contracts with a fair value of ($77,000) (23 contracts representing 1.0 million gallons), which is classified in other current assets in the Company’s consolidated balance sheets. The Company recognized a loss during the first quarter of 2010 related to these contracts of $0.3 million. The loss realized on hedging contracts is substantially offset by increased profitability on sale of fuel purchased through the pipeline.

9

9. 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
	March 29, 2009			April 4, 2010
	(in thousands)
Cash rent:
Store base rent	$	9,033		$	10,126
Equipment rent		201			208
Contingent rent		40			64
Total cash rent	$	9,274		$	10,398
Non–cash rent:
Straight-line rent		250			188
Amortization of deferred gain		(511	)		(535	)
Net rent expense	$	9,013		$	10,051

Letters of Credit

We were contingently liable for $12.2 million related to irrevocable letters of credit required by various insurers and suppliers at April 4, 2010.

10. Interest Expense and Interest Income

The components of net interest expenses are as follows:

	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Cash interest expense	$	8,901		$	8,887
Cash paid on interest rate swap		138			270
Capitalized interest		(8	)		(41	)
Amortization of loan costs & issuance premium		628			607
Cash interest income		(26	)		(35	)
Interest expense, net	$	9,633		$	9,688

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11. Income Tax

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the three months ended April 4, 2010 and March 29, 2009 is as follows:

	Three Months Ended April 4, 2010
	(in thousands)				Tax rate %
Tax at statutory federal rate	$	(2,801	)		35.0	%
State and local tax, net of federal benefit		283			(3.5	)
Other		(500	)		6.2
Tax benefit per financial statement	$	(3,018	)		37.7	%
				��
	Three Months Ended March 29, 2009
	(in thousands)				Tax rate %
Tax at statutory federal rate	$	(359	)		35.0	%
State and local tax, net of federal benefit		273			(26.6	)
Other		(10	)		1.0
Tax benefit per financial statement	$	(96	)		9.4	%

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 three months ended March 29, 2009 and April 4, 2010 was $0.5 million and $0.4 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, New Mexico and Louisiana. The Company is subject to examinations in all jurisdictions for all returns filed since October 24, 2006.

As of April 4, 2010, 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.

12. 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 17,158,717 were issued and 17,141,393 were outstanding as of January 3, 2010, and 17,166,919 were issued and 17,138,469 were outstanding as of April 4, 2010, respectively. Included in these amounts are 163,115 and 129,160 shares, respectively, which represent restricted shares and are not yet vested and have no voting rights. Treasury shares consist of 17,324 and 28,450 shares respectively 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 1,680,204 shares of common stock are outstanding as of April 4, 2010, 644,859 of which are vested (See Note 13).

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13. Share-Based Compensation

The Company has granted options and restricted stock subject to vesting requirements under its 2006 Equity Incentive Plan. Vesting of most grants are over three to five years. 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 30, 2007	1,550,217		$	18.11
Granted	475,480			17.14
Exercised	—			—
Forfeited or expired	(316,855	)		21.70
Balances at December 28, 2008	1,708,842			17.17
Granted	91,158			12.12
Forfeited or expired	(56,978	)		19.19
Balances at January 3, 2010	1,743,022			16.84
Granted	—			—
Forfeited or expired	(62,818	)		20.38
Balances at April 4, 2010	1,680,204			16.71
Exercisable at April 4, 2010	644,859		$	16.10
	Restricted Stock
	Number of Units		Grant-Date Average Fair Value Per Unit
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	85,800			12.22
Vested	(35,815	)		14.83
Forfeited	(6,000	)		22.23
Nonvested at January 3, 2010	163,115			14.80
Granted	—			—
Vested	(28,055	)		12.25
Forfeited	(5,900	)		12.25
Nonvested at April 4, 2010	129,160		$	15.36

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We did not grant any options or shares of restricted stock during the first quarter of 2010.

We adopted ASC 718 “Compensation – Stock Compensation” 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 ASC 718, we are applying ASC 718 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 $0.8 million and $0.7 million during the three months ended March 29, 2009 and April 4, 2010, 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 ASC 718 the Company’s net profits and losses for the periods presented would have been affected as follows:

	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Net loss attributable to Susser Holdings Corporation, as reported	$	(931	)	$	(4,985	)
Deduct:
Compensation expense on options determined under fair value based method for all awards, net of tax		(11	)		(7	)
Pro forma net loss attributable to Susser Holdings Corporation	$	(942	)	$	(4,992	)

The Company has requested shareholder approval of an amendment to the 2006 Equity Incentive Plan to permit the Company to implement a one-time option exchange offer program to allow the Company to cancel certain options held by some employees with exercise prices substantially in excess of the market price in exchange for the issuance of new equity grants. (See Proposal 3 in the Notice of Annual Meeting and Proxy Statement filed April 21, 2010)

14. Other Comprehensive Loss:

Other comprehensive loss is comprised of the following:

	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Balance at the beginning of the period	$	—		$	(358	)
Amount reclassified to income, net of tax of $48 as of March 29, 2009 and $94 as of April 4, 2010		90			175
Net change in fair value of interest rate swaps, net of tax benefit of ($239) as of March 29, 2009 and ($256) as of April 4, 2010		(443	)		(475	)
Balance at end of the period	$	(353	)	$	(658	)

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	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Net loss	$	(919	)	$	(4,974	)
Net unrealized loss in fair value of cash flow hedges, net of tax benefit of ($193) as of March 29, 2009 and ($162) as of April 4, 2010		(353	)		(658	)
Total comprehensive loss, net of tax benefit		(1,272	)		(5,632	)
Less:
Comprehensive loss attributable to noncontrolling interest		12			11
Comprehensive loss attributable to Susser Holdings Corporation	$	(1,284	)	$	(5,643	)

15. Segment Reporting

The Company operates its business in two primary operating segments, both of which are included as reportable segments. No operating segments have been aggregated in identifying the two reportable segments. The retail segment, Stripes, operates retail convenience stores in Texas, New Mexico and Oklahoma that sell merchandise, prepared food and motor fuel, and also offer a variety of services including car washes, lottery, ATM, money orders, prepaid phone cards and wireless services, and movie rentals. The wholesale segment, SPC, purchases fuel from a number of refiners and supplies it to the Company’s retail stores, to independently-owned dealer stations under long-term supply agreements and to other end users of motor fuel. Sales of fuel from the wholesale to retail segment are 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.

Segment Financial Data for the Three Months Ended March 29, 2009

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment			Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	181,919	$	—		$	—		$	—		$	181,919
Fuel		322,072		398,000			(230,673	)		—			489,399
Other		7,352		4,260			(2,233	)		111			9,490
Total revenue		511,343		402,260			(232,906	)		111			680,808
Gross profit:
Merchandise		62,416		—			—			—			62,416
Fuel		21,204		4,251			—			—			25,455
Other		7,352		2,081			(16	)		(27	)		9,390
Total gross profit		90,972		6,332			(16	)		(27	)		97,261
Selling, general and administrative		73,539		2,962			(16	)		2,220			78,705
Depreciation, amortization, and accretion		8,819		1,023			—			121			9,963
Other operating expenses (income)		55		(3	)		—			—			52
Operating income (loss)	$	8,559	$	2,350		$	—		$	(2,368	)	$	8,541
Gallons		179,412		300,139			(177,670	)		—			301,881
Gross capital expenditures	$	5,144	$	1,131		$	—		$	—		$	6,275

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Segment Financial Data for the Three Months Ended April 4, 2010

(dollars and gallons in thousands)

	Retail Segment		Wholesale Segment		Intercompany Eliminations			All Other			Totals
Revenue:
Merchandise	$	191,038	$	—	$	—		$	—		$	191,038
Fuel		478,619		637,819		(379,624	)		—			736,814
Other		7,675		4,559		(2,205	)		244			10,273
Total revenue		677,332		642,378		(381,829	)		244			938,125
Gross profit:
Merchandise		62,383		—		—			—			62,383
Fuel		20,291		5,028		—			—			25,319
Other		7,675		2,209		(147	)		182			9,919
Total gross profit		90,349		7,237		(147	)		182			97,621
Selling, general and administrative		78,817		3,310		(147	)		2,477			84,457
Depreciation, amortization, and accretion		9,777		1,217		—			214			11,208
Other operating expenses (income)		266		—		—			(2	)		264
Operating income (loss)	$	1,489	$	2,710	$	—		$	(2,507	)	$	1,692
Gallons		183,068		300,961		(180,948	)		—			303,081
Gross capital expenditures	$	8,702	$	504	$	—		$	—		$	9,206

16. Earnings Per Share

The Company is presenting earnings per share for the historical periods using the guidance provided in ASC 260, “Earnings per Share (EPS)”. Under ASC 260, 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 13).

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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
	March 29, 2009			April 4, 2010
	(in thousands, except per share data)
Net loss attributable to Susser Holdings Corporation	$	(931	)	$	(4,985	)
Denominator for basic earnings per share:
Weighted average number of common shares outstanding during the period		16,924,522			16,994,090
Incremental common shares attributable to exercise of outstanding dilutive options and restricted shares		—			—
Denominator for diluted earnings per common share		16,924,522			16,994,090
Net loss per share, attributable to Susser Holdings Corporation:
Per common share – basic	$	(0.05	)	$	(0.29	)
Per common share – diluted	$	(0.05	)	$	(0.29	)
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		1,860,819			1,764,818

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report. Additional discussion and analysis related to our company is contained in our Annual Report on Form 10-K, including the audited consolidated financial statements for the fiscal year ended January 3, 2010. Our fiscal year contains either 52 or 53 weeks and ends on the Sunday closest to December 31. All references to the first quarter of 2009 and 2010 refer to the 13-week periods ended March 29, 2009 and April 4, 2010, 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;

• Sensitive economic conditions that impact consumer spending;

• 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 suppliers for credit terms;

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

• Acts of war and terrorism;

• Risks relating to our substantial indebtedness;

• Dependence on our information technology systems;

• Changes in accounting standards, policies or estimates;

• Impairment of goodwill or indefinite lived assets; and

• Other unforeseen factors.

For a full discussion of these and other risks and uncertainties, please refer to “Item 1A—Risk Factors” in our Annual Report on Form 10-K for the year ended January 3, 2010, 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 April 4, 2010, our retail segment operated 527 convenience stores in Texas, New Mexico and Oklahoma offering merchandise, food service, motor fuel and other services.

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For the three months ended April 4, 2010, we sold 303.1 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 end users. We believe our combined retail/wholesale business model makes it possible for us to pursue strategic acquisition opportunities and operate acquired properties under either format, providing an optimized return on investment. Our market share and scale allows the integration of new or acquired stores while minimizing overhead costs. In addition, we believe our foodservice and merchandising offerings distinguish us from our competition, providing the opportunity for increased traffic in our stores.

During the first quarter of 2010, we added two stores to the retail segment and currently have three stores under construction. We added three dealer sites to our wholesale segment for a total of 393 wholesale dealers at the end of the quarter. In May 2010, we entered into a contract to sell the seven Village Markets grocery stores that had been acquired in the TCFS, Inc. acquisition in November 2007. The divesture is not material to our operations, and will allow our retail segment to focus on our core convenience store format. The transaction is expected to close during the second quarter.

Our total revenues, net loss attributable to Susser Holdings Corporation and Adjusted EBITDA were $938.1 million, $(5.0) million and $13.9 million, respectively, for first quarter 2010, compared to $680.8 million, $(0.9) million and $19.3 million, respectively, for first quarter 2009. 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”.

The cost of crude oil has steadily increased from the first quarter of 2009 to the first quarter of 2010, reaching an average of approximately $80 per barrel for the quarter. We generally experience lower fuel margins when the cost of fuel is changing gradually over a longer period and higher fuel margins when the cost of fuel is more volatile over a shorter period of time.

The economy in Texas, where the majority of our operations are conducted, continued to fare better than many other parts of the nation during early 2009, partly buoyed by a relatively stable housing market, a healthy regional banking market and relatively strong population growth. However, our markets experienced a sharp increase in unemployment and reduced economic activity in the second half of 2009, and we reported a 1.2% decrease in same store merchandise sales during the fourth quarter of 2009. In spite of the recent economic trends, our business remained generally more resilient than many other retail formats, and we continued to increase our market share in key merchandise categories, based on supplier information. We began to see stabilization and/or improvement in key economic indicators in our markets in early 2010 and for the first three months of 2010 we reported 2.5% positive comparable merchandise results over first quarter 2009.

After a tightening in the nation’s credit markets beginning in 2008, we are beginning to see improved availability of financing sources. We completed sale/leaseback transactions during the first quarter for total net proceeds of $5.8 million and we entered into a build-to-suit arrangement on two other retail locations. We entered into a new $10 million mortgage loan with a regional bank during the first quarter of 2010. In early May 2010, we issued $425 million of 8.5% senior unsecured notes, due May 15, 2016. The proceeds, net of discounts, fees and expenses, and along with borrowings under our revolving credit facility, will be used to redeem our existing $300 million 10 5/8% senior unsecured notes and pay off the remaining $89.3 million term loan. We also entered into an amended and restated credit facility which, among other things, extends the maturity of our revolving credit facility to May 2014, increases our borrowing base to achieve full availability of the $120 million facility, and provides additional flexibility on covenant requirements. 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 a sustained improvement in our results, the economy and in the capital markets. As of April 4, 2010, we had $5.9 million drawn and $12.2 million in standby letters of credit issued against our $120.0 million revolving line of credit. As of April 4, 2010, our unused availability under the revolver was $84.9 million.

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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
	March 29, 2009			April 4, 2010
	(dollars in thousands, except motor fuel pricing and gross profit costs per  gallon)
Revenue:
Merchandise sales	$	181,919		$	191,038
Motor fuel—retail		322,072			478,619
Motor fuel—wholesale		167,327			258,195
Other (1)		9,490			10,273
Total revenue	$	680,808		$	938,125
Gross profit:
Merchandise	$	62,416		$	62,383
Motor fuel—retail		21,204			20,291
Motor fuel—wholesale		4,251			5,028
Other (1)		9,390			9,919
Total gross profit	$	97,261		$	97,621
Adjusted EBITDA (2):
Retail	$	17,433		$	11,532
Wholesale		3,370			3,927
Other		(1,486	)		(1,578	)
Total Adjusted EBITDA	$	19,317		$	13,881
Retail merchandise margin		34.3	%		32.7	%
Merchandise same store sales growth		6.0	%		2.5	%
Average per retail store:
Merchandise sales	$	355.1		$	363.7
Motor fuel gallons		356.0			355.2
Motor fuel gallons sold:
Retail		179,412			183,068
Wholesale		122,469			120,013
Average retail price of motor fuel	$	1.80		$	2.61
Motor fuel gross profit cents per gallon:
Retail		11.8	¢		11.1	¢
Wholesale		3.5	¢		4.2	¢

(1) 2009 reflects reclassifications in operating expense, other revenue and other gross profit.

(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 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
	March 29, 2009			April 4, 2010
	(in thousands)
Net loss attributable to Susser Holdings Corporation	$	(931	)	$	(4,985	)
Depreciation, amortization, and accretion		9,963			11,208
Interest expense, net		9,633			9,688
Income tax benefit		(96	)		(3,018	)
EBITDA		18,569			12,893
Non-cash stock based compensation		773			728
Loss on disposal of assets		52			264
Other miscellaneous		(77	)		(4	)
Adjusted EBITDA	$	19,317		$	13,881

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

	Three Months Ended
	March 29, 2009			April 4, 2010
	(in thousands)
Net cash provided by operating activities	$	11,722		$	17,970
Changes in operating assets & liabilities		(2,409	)		(13,010	)
Loss on disposal of assets		(52	)		(264	)
Non–cash stock based compensation expense		(773	)		(728	)
Noncontrolling interest		(12	)		(11	)
Deferred income tax		407			2,102
Amortization of debt premium		149			164
Income taxes		(96	)		(3,018	)
Interest expense, net		9,633			9,688
EBITDA		18,569			12,893
Non-cash stock based compensation		773			728
Loss on disposal of assets		52			264
Other miscellaneous		(77	)		(4	)
Adjusted EBITDA	$	19,317		$	13,881

Refer to Note 15 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
	Three Months Ended				Three Months Ended					Three Months Ended						Three Months Ended
	March 29, 2009		April 4, 2010		March 29, 2009			April 4, 2010		March 29, 2009			April 4, 2010			March 29, 2009			April 4, 2010
	(in thousands)
Operating income (loss)	$	8,559	$	1,489	$	2,350		$	2,710	$	(2,368	)	$	(2,507	)	$	8,541		$	1,692
Depreciation, amortization, and accretion		8,819		9,777		1,023			1,217		121			214			9,963			11,208
Other miscellaneous		—		—		—			—		77			4			77			4
Noncontrolling interest		—		—		—			—		(12	)		(11	)		(12	)		(11	)
EBITDA		17,378		11,266		3,373			3,927		(2,182	)		(2,300	)		18,569			12,893
Non-cash stock based compensation		—		—		—			—		773			728			773			728
(Gain) loss on disposal of assets and impairment charge		55		266		(3	)		—		—			(2	)		52			264
Other operating expenses		—		—		—			—		(77	)		(4	)		(77	)		(4	)
Adjusted EBITDA	$	17,433	$	11,532	$	3,370		$	3,927	$	(1,486	)	$	(1,578	)	$	19,317		$	13,881

21

First Quarter 2010 Compared to First Quarter 2009

The following discussion of results for first quarter 2010 compared to first quarter 2009 compares the 13-week period of operations ended April 4, 2010 to the 13-week period of operations ended March 29, 2009. During 2009, we constructed 15 stores of which 14 opened after the first quarter of 2009 and therefore those stores did not contribute to results in the first quarter of 2009. In addition, we have opened 2 stores during the first quarter of 2010.

Total Revenue. Total revenue for first quarter 2010 was $938.1 million, an increase of $257.3 million, or 37.8%, from 2009. The increase in total revenue was driven by a 48.6% increase in retail fuel revenue and a 54.3% increase in wholesale fuel revenue, and an increase in merchandise sales of 5.0%, as further discussed below.

Total Gross Profit. Total gross profit for first quarter 2010 was $97.6 million, an increase of $0.4 million, or 0.4% over 2009. The increase was primarily due to the impact of new stores constructed or acquired during 2009 and 2010 ($1.9 million of growth in gross profit), the increase in wholesale fuel gross profit of $0.8 million and the increase in other gross profit of $0.5 million, offset by the decrease in retail fuel margin and other reasons as further described below.

Merchandise Sales and Gross Profit. Merchandise sales were $191.0 million for first quarter 2010, a $9.1 million, or 5.0% increase over 2009. Our performance was due to a 2.5% merchandise same store sales increase, accounting for $4.6 million of the increase, with the balance due to new stores built or acquired in 2009 and 2010. Merchandise same-store sales include food service sales but do not include motor fuel sales. Key categories contributing to the merchandise same store sales increase were cigarettes, candy, fountain and beer.

Merchandise gross profit was $62.4 million for the first quarter of 2010, a 0.1% decrease over 2009, which was driven by a decrease in gross profit margin from 34.3% to 32.7% slightly offset by the increase in merchandise sales. The decrease in gross margin was primarily attributable to the Federal tax increase on cigarettes effective April 1, 2009, as well as manufacturer price increase effective in March 2009 and competitive pressures brought on by the recessionary economic climate. Our gross profit percentage was also impacted by consumers moving to lower margin items in categories such as packaged beverages and beer. 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 2010 were $478.6 million, an increase of $156.5 million, or 48.6% over 2009, primarily driven by a 45.6% increase in the average retail price of motor fuel and a 2.0% increase in retail gallons sold. We sold an average of 0.4 million gallons per retail store, 0.2% less than last year. Retail motor fuel gross profit decreased by $0.9 million or 4.3% over 2009 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 11.8 cents per gallon to 11.1 cents per gallon for 2009 and 2010, respectively. This reduction in fuel margin decreased retail fuel gross profit by $1.3 million. After deducting credit card fees, the net margin decreased from 9.1 cents per gallon to 7.0 cents per gallon from first quarter 2009 to first quarter 2010.

Wholesale Motor Fuel Sales, Gallons, and Gross Profit. Wholesale motor fuel revenues to third parties for the first quarter of 2010 were $258.2 million, a 54.3% increase over 2009. The increase was driven by a 57.5% increase in the wholesale selling price per gallon slightly offset by a 2.0% decrease in gallons sold. Wholesale motor fuel gross profit of $5.0 million increased $0.8 million or 18.3% from 2009, due to a 20.7% increase in the gross profit per gallon from 3.5 to 4.2 cents per gallon (responsible for a $0.9 million increase), partly offset by the decrease in gallons.

Other Revenue and Gross Profit. Other revenue of $10.3 million for first quarter 2010 increased by $0.8 million or 8.2% from 2009, with a 5.6% increase in associated gross profit, primarily attributable to growth in ATM fees and movie rental income.

Personnel Expense. For the first quarter of 2010, personnel expense increased $0.6 million or 1.8% over 2009. Of the increase in personnel expense, $1.0 million was attributable to the new stores acquired and constructed during 2009 and 2010. Despite increases to the minimum wage in July 2009, personnel expense in existing stores decreased $0.6 million due to focused efforts on labor usage and overtime management. The retail division direct store personnel expenses were 18.8% to merchandise sales, a 60 basis point decrease from the first quarter of 2009.

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General and Administrative Expenses. For first quarter 2010, general and administrative expenses decreased by $0.3 million, or 3.6% from 2009, primarily reflecting initiatives implemented during the first quarter of 2010. G&A expenses include non-cash stock based compensation expenses which were $0.7 million for the quarter.

Other Operating Expenses. Other operating expenses increased by $4.4 million or 17.4% over 2009. The increase was primarily due to an increase in credit card expense of $2.5 million from 2009 and an increase in maintenance expense of $1.2 million. Credit card costs are directly related to the cost of fuel and we have plans in place to improve our maintenance spending during the balance of the year. In addition, insurance expense increased $0.7 million primarily due to higher insurance claims. Operating expenses for new stores accounted for $0.4 million of increased costs.

Rent Expense. Rent expense for first quarter 2010 of $10.1 million was $1.0 million or 11.5% higher than 2009 due primarily to rent expense on additional leased stores.

Depreciation, Amortization, and Accretion. Depreciation, amortization and accretion expense for first quarter 2010 of $11.2 million was up $1.2 million or 12.5% from 2009, related to an increase in depreciable assets.

Income from Operations. Income from operations for first quarter 2010 was $1.7 million, compared to $8.5 million for 2009. The decrease is primarily attributed to higher operating expenses, as described above, a $0.5 million decrease in fuel gross profit resulting from lower retail fuel margins, partly offset by higher wholesale fuel margins, the $0.5 million increase in other gross profit and a $0.3 million increase in fuel gross profit due to higher gallons.

Income Tax. The income tax benefit accrued for first quarter 2010 was $3.0 million, which consisted of $0.4 million of expense attributable to the Texas margin tax and $3.4 million of income tax benefit related to federal and state income tax. The income tax benefit accrued for first quarter 2009 was $0.1 million, which consisted of $0.5 million of expense attributable to the Texas margin tax and $0.6 million of income tax benefit related to federal and state income tax. See Note 11 of the accompanying Notes to Consolidated Financial Statements for further discussion of our income tax provision.

Net loss attributable to Susser Holdings Corporation. We recorded net loss attributable to Susser Holdings Corporation for the first quarter 2010 of $5.0 million, compared to net loss attributable to Susser Holdings Corporation of $0.9 million for 2009. The decrease is primarily due to the same factors impacting operating income, as described above.

Adjusted EBITDA.Adjusted EBITDA for first quarter 2010 was $13.9 million, a decrease of $5.4 million, or 28.1% compared to 2009. Retail segment Adjusted EBITDA of $11.5 million decreased by $5.9 million, or 33.9% compared to 2009, primarily due to lower fuel margins and increased credit card expense. Wholesale segment Adjusted EBITDA of $3.9 million increased by $0.6 million, or 16.5% from 2009, primarily resulting from the higher fuel gross profit. Other segment Adjusted EBITDA reflects net expenses of $1.6 million for the quarter, compared to $1.5 million for the same period in 2009.

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 $18.0 million and $11.7 million for the first three months of 2010 and 2009, respectively. The change in our cash provided from operating activities for the respective periods was primarily attributable to the changes in working capital. Our daily working capital requirements fluctuate within each month, primarily in response to the timing of motor fuel tax, sales tax and rent payments. We had $20.2 million of cash and cash equivalents on hand at April 4, 2010 compared to $14.4 million at March 29, 2009, and $18.0 million at January 3, 2010, of which $5.2 million was restricted at January 3, 2010 and April 4, 2010.

23

Capital Expenditures. Capital expenditures, before any sale/leasebacks and asset dispositions, were $9.2 million and $6.3 million during the first three months of 2010 and 2009, respectively. We opened two new retail stores during first quarter 2010 bringing our store count to 527 as of April 4, 2010, and have another three stores under construction. We received proceeds of $5.8 million from sale-leaseback transactions during the first quarter.

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

	Three Months Ended April  4, 2010
Retail stores:
Number at beginning of period	525
New stores	2
Number at end of period	527
Wholesale dealer locations:
Number at beginning of period	390
New locations	3
Number at end of period	393

During fiscal 2010, we plan to invest approximately $25 to $50 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 2010, 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 April 4, 2010, our outstanding debt was $405.2 million, excluding $3.0 million unamortized issuance premium. We entered into a $10 million mortgage note with a regional bank in February 2010 with a five-year term, 15-year amortization and variable interest rate based on prime rate.

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 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.

24

As of April 4, 2010, we had $5.9 million outstanding under the revolving credit facility and $12.2 million in standby letters of credit. Our borrowing base in effect at April 4, 2010, allowed a maximum borrowing, including outstanding letters of credit, of $103.0 million. Our unused availability on the revolver at April 4, 2010 was $84.9 million.

On May 7, 2010, we entered into an amended and restated credit agreement which, among other things extends the maturity to May 2014, increases the amount of real estate that can be included in the borrowing base and modifies certain covenant requirements (See Note 3).

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 8 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 (the “2013 notes”). 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 2013 notes. The 2013 notes pay interest semiannually in arrears on June 15 and December 15 of each year. The 2013 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.

See Note 3 for a discussion of the new Senior Unsecured Notes issued May 7, 2010, and redemption of the existing 2013 notes.

For more information regarding the terms of the revolving credit facility, the term loan facility and the 2013 notes, please see Note 8 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.

25

Contractual Obligations and Commitments

Contractual Obligations. The following table summarizes by fiscal year our expected payments on our long-term debt and future operating lease commitments as they have significantly changed due to our restructure of debt subsequent to the end of the first quarter (See Note 3):

	Payments Due by Period
	(dollars in thousands)
	2010		2011		2012		2013		2014		Thereafter		Total
Long term debt obligations(1)	$	347	$	529	$	508	$	534	$	562	$	432,527	$	435,007
Interest(2)		38,184		37,197		37,197		37,197		37,197		52,682		239,654
Operating lease obligations(3)		40,876		40,480		38,669		38,288		37,636		411,826		607,775
Total	$	79,407	$	78,206	$	76,374	$	76,019	$	75,395	$	897,035	$	1,282,436

(1) Payments for 2010 through 2014 reflect required principal payments on our mortgage loan and a promissory note. No principal amounts are due on our senior notes until May 2016. Assumes current balance of senior notes remain outstanding until maturity. Excludes activity on our revolving credit facility and one-time impacts of the May 2010 refinancing.

(2) Includes interest on senior notes and promissory note (at assumed interest rate of 5%). Excludes interest on revolving credit facility, but includes letter of credit fees and a commitment fee on the full $120 million facility less the outstanding letters of credit, using the new rate effective May 7, 2010. Excludes the one-time impacts of the May 2010 refinancing.

(3) Some of our retail store leases require percentage rentals on sales and contain escalation clauses. The minimum future operating lease payments shown above do not include contingent rental expense, which historically have been insignificant. Some lease agreements provide us with an option to renew. We have not included renewal options in our future minimum lease amounts as the renewals are not reasonably assured. Our future operating lease obligations will change if we exercise these renewal options and if we enter into additional operating lease agreements.

Properties. Most of our leases are net leases requiring us to pay taxes, insurance, and maintenance costs. We believe that no individual site is material to us. The following table summarizes the number of owned and leased properties:

	As of
	April 4, 2010
	Fee	Leased
Operating sites:
Retail	244	283
Wholesale	49	29
Total	293	312
Office locations	4	3
Properties currently under construction	3	—
Properties held for future development	29	—
Income producing properties	5	2
Surplus properties	40	5

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.

26

Quarterly Results of Operations and Seasonality

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

	2008												2009												2010
	(dollars and gallons in thousands except per share amounts)
	1st QTR			2nd QTR			3rd QTR			4th QTR			1st QTR			2nd QTR			3rd QTR			4th QTR(c)			1st QTR
Merchandise sales	$	168,771		$	187,870		$	189,272		$	183,944		$	181,919		$	199,940		$	201,190		$	201,375		$	191,038
Motor fuel sales:
Retail		519,797			618,037			619,692			393,201			322,072			392,593			427,603			463,266			478,619
Wholesale		302,595			415,179			396,952			208,769			167,327			221,336			240,874			246,388			258,195
Other income(a)		9,543			9,376			8,253			9,394			9,490			9,297			12,433			10,205			10,273
Total revenue		1,000,706			1,230,462			1,214,169			795,308			680,808			823,166			882,100			921,234			938,125
Merchandise gross profit		56,668			64,416			65,966			63,592			62,416			66,496			66,307			65,865			62,383
Motor fuel gross profit:
Retail		20,257			32,165			36,402			31,732			21,204			26,988			34,613			22,216			20,291
Wholesale		5,580			7,429			8,888			9,037			4,251			5,030			6,388			4,538			5,028
Other gross profit(a)		9,103			8,837			7,921			9,417			9,390			9,302			12,453			9,922			9,919
Total gross profit		91,608			112,847			119,177			113,778			97,261			107,816			119,761			102,541			97,621
Income from operations		4,972			20,291			21,137			19,499			8,541			13,390			19,826			313			1,692
Net income(loss) attributable to Susser Holdings Corporation	$	(3,360	)	$	6,662		$	6,862		$	6,313		$	(931	)	$	2,165		$	6,503		$	(5,669	)	$	(4,985	)
Earnings (loss) per common share:
Basic	$	(0.20	)	$	0.39		$	0.41		$	0.37		$	(0.05	)	$	0.13		$	0.38		$	(0.33	)	$	(0.29	)
Diluted	$	(0.20	)	$	0.39		$	0.40		$	0.37		$	(0.05	)	$	0.13		$	0.38		$	(0.33	)	$	(0.29	)
Merchandise margin, net		33.6	%		34.3	%		34.9	%		34.6	%		34.3	%		33.3	%		33.0	%		32.7	%		32.7	%
Fuel gallons:
Retail		169,313			165,113			163,399			179,483			179,412			177,887			175,317			187,033			183,068
Wholesale		114,110			124,329			122,318			125,759			122,469			125,832			125,205			121,314			120,013
Motor fuel margin:
Retail (b)		12.0	¢		19.5	¢		22.3	¢		17.7	¢		11.8	¢		15.2	¢		19.7	¢		11.9	¢		11.1	¢
Wholesale		4.9	¢		6.0	¢		7.3	¢		7.2	¢		3.5	¢		4.0	¢		5.1	¢		3.7	¢		4.2	¢

(a) Reflects reclassifications in operating expense, other income, and other gross profit in 2008 and 2009.

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

(c) Includes 14 weeks of operation.

27

Summary of Significant Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results of operations, and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended January 3, 2010. 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.

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. There are no indicators of impairment as of April 4, 2010 (See Note 7).

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. As a consequence of the debt refinancing which occurred on May 7, 2010 (See Note 3), we repaid our term facility and therefore had no balance outstanding. As a result, the only variable rate debt we had outstanding at April 4, 2010 that exists on an ongoing basis is the $5.9 million outstanding on the revolving credit facility. In addition we had $10 million in other notes payable that is subject to a variable interest rate. The annualized effect of a one percentage point change in floating interest rates on our ongoing variable rate debt obligations at April 4, 2010 would be to change interest expense by approximately $0.2 million.

Our primary exposure relates to:

• Interest rate risk on short-term borrowings and

• The impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.

We manage interest rate risk on our outstanding long-term and short-term debt through the use of fixed and variable rate debt. While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis.

From time to time, we enter into interest rate swaps to either reduce the impact of changes in interest rates on our floating rate long-term debt or to take advantage of favorable variable interest rates compared to our fixed rate long-term debt. As of the end of the first quarter of 2009, we held 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. As a result of the prepayment of the term loan on May 7, 2010 (See Note 3), we intend to settle the related interest rate swaps.

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 8 in the accompanying Notes to Consolidated Financial Statements.

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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 Financial Officer have concluded, as of the end of the period covered by this report, that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by the Company in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of 2010 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.

29

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

You should carefully consider the risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended January 3, 2010, 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. (Removed and Reserved)

Item 5. Other Information

None.

Item 6. Exhibits

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	SUSSER HOLDINGS CORPORATION
Date: May 14, 2010
	By	/s/ Mary E. Sullivan
		Mary E. Sullivan
		Executive Vice President and Chief Financial Officer (On behalf of the registrant, and in her capacity as principal financial officer)

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EXHIBIT INDEX

Exhibit No.	Description
4.1	Indenture, dated as of May 7, 2010, by and among Susser Holdings, L.LC., Susser Finance Corporation, the guarantors named therein and Wells Fargo Bank, N.A., as Trustee, relating to the issuance of the 8.50% Senior Notes due 2016.†
4.2	Form of 144A Notes.†
4.3	Form of Regulation S Notes.†
4.4	Form of Guarantee.†
4.5	Registration Rights Agreement, dated as of May 7, 2010, by and among Susser Holdings, L.L.C., Susser Finance Corporation, Banc of America Securities LLC, BMO Capital Markets Corp., Wells Fargo Securities, LLC, RBC Capital Markets Corporation, Morgan Keegan & Company, Inc., BBVA Securities Inc., and Morgan Joseph & Co., Inc.†
10.1	Amended and Restated Credit Agreement, dated May 7, 2010, among Susser Holdings, L.L.C., Susser Holdings Corporation, Bank of America, N.A., Wells Fargo Bank, National Association, BMO Capital Markets, Banc of America Securities LLC, and the other lenders party thereto.†
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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