Susser Holdings Corporation

The Long Game—2000s 199 it opened the first Circle K with a drive-thru window. This location used the drive-thru for meal service off the Laredo Taco Company menu, which included breakfast and lunch tacos, Krispy Kreme doughnuts, and bags of chips. The company planned to open another sixteen new stores before the end of the year. Circle K Trade Show I n March 2005, a room full of Circle K store managers and key players met in the American Bank Center for the all-day sixth annual company trade show and sales meeting. Sam L. dressed up as the lead character in “The Incredibles,” Mr. Incredible himself, because the company had a record-setting year. There were 125 vendors at the trade show, giving away free goodies during the morning. Awards and prizes, such as big-screen televisions, DVD players, iPods, and even cars were given out during the day—this last giveaway sponsored by Susser and Coca-Cola. Drawings were held to give away five new fire red Ford Mustangs to store managers who had met certain criteria during July through October the previous year… a big incentive for all the store managers. Riviera Circle K I n June 2005, Susser Holdings celebrated the opening of its newest, largest Circle K store in Riviera, on the Texas Gulf Coast. This new flagship store, with more than eight thousand square feet and seven acres of concrete, was located along Highway 77 between Brownsville and Corpus Christi and included a gas station, convenience store, restaurant, and grocery store all rolled into one. Guests at the grand opening included leading local law enforcement officials, and there were also special appearances by two favorite snack product characters—Chester Cheetah and Patito Gansito. Laredo Taco served samples of its signature items, and there were Mexican treats like pan dulce and paletas, along with Krispy Kreme doughnuts and Blue Bell ice cream. The new store reflected a trend of tailoring the convenience store’s

200 Susser Holdings inventory toward the ethnicity and cultural preferences of its customers, something all successful convenience stores are doing. Susser developed a list of suppliers that helped it serve the products its customers wanted. For example, Coca-Cola provided Mexicana Coca-Cola, while Frito-Lay supplied Gamesa and Sabritas snack items. Other suppliers provided everything from candy imported directly from Mexico to sombreros to tortillas to Coronas. 2005—Wellspring Capital One of the responsibilities Sam L. had was to generate strong returns for shareholders and source capital to meet future growth needs. In 2005, the capital market was extremely favorable, and Sam L. “kept his periscope up,” so to speak, watching for opportunities. This strategy would land him a new investor when New York-based Wellspring Capital Management bought out Arena Capital, Bank of America (successor to Bank Boston) and Capstreet in a $575 million recapitalization that produced a 3.84-times return on the $37.5 million investment that the three firms had made in 2000 and 2001. Commenting on the differences between Sam J. and Sam L., Bruce Krysiak said, “Sam J. makes big, sweeping moves, not building brick by brick. Sam L. is a very strategic and long-term thinker, considering how to build a business slowly and tactically—with more patience and more connection to the business on a daily basis.” Kevin Mahany added, “Sam L. has an amazing understanding of capital markets and their timing, knowing when to seize opportunities.” A good plan violently executed now will crush a perfect plan executed next week. —General George Patton

The Long Game—2000s 201 Wellspring replaced three institutional investors when it invested $92 million. It was the largest investment made to date for the thirteen-year-old New York-based firm, which managed more than $2 billion of private-equity capital. Bill Dawson, managing partner for Wellspring Capital Management, said this about Sam L.: “We look for businesses that are very well-managed and have very defensible niches, good free-cash-flow characteristics, and good growth prospects. Sam Susser really checks all those boxes, especially on the management front. The c-store industry has a real dearth of management talent. In my opinion, Sam is by far, by a very wide margin, the best CEO in the industry.” Dawson added, “He has a history of making money for his investors. People trust him. If he tells you something, it happens.” In 2004, the three private equity firms—Arena Capital, Summit/Cap Street, and Bank of Boston—had been ready to step away from the table. To compound matters, around this time, the Sussers felt that Arena’s leadership was acting counter to the best interests of Susser Holdings. Sam L. wanted to grow the relationship and the business, but Arena just wanted to get out. Bruce Krysiak remembers how the situation affected Sam L.: “He was mad. He got in the car with me, and we were driving, and he insisted, ‘These guys are wrong.’ But he calmed down—he has such passion and commitment, but he knows how to control it. He’s a realist and can handle problems tactfully and calmly.” Wellspring Capital was brought in to recapitalize and to buy out the three private equity partners, and Wellspring later helped take the family company public. The Sussers also completed a sale-leaseback that generated $170 million and issued $170 million in high-yield bonds which refinanced existing debt, extended maturities, and strengthened the balance sheet.

202 Susser Holdings Mid-2000s Highlights I n 2005, Susser Holdings distributed 809.5 million gallons of fuel, and it was among the nation’s largest distributors of Citgo and Chevron fuel and a significant distributor of Conoco, Exxon, Shell, and Texaco branded fuels. The company recorded $1.9 billion in revenue and $54 million in earnings. That year, Susser was recognized as the “Outstanding Convenience Store in the Country” by Trade Magazine for its community service. In the previous twelve months, the company had contributed approximately $850,000 to hundreds of organizations throughout the country. Locally, Susser actively donated to institutions such as the University of Texas-Pan American, the University of Texas-Brownsville, Texas A&M-Corpus Christi, the United Way, and Driscoll Children’s Hospital. One of the big issues in providing large quantities of gasoline is making sure that the fuel does not contaminate the soil or water in the area where it is being stored. As underground storage tank systems aged and new technology became available, state and federal laws were created to protect the environment. Susser Petroleum had to learn to navigate these regulations, so they could avoid costly legal entanglements. Environmental Services A subsidiary, Applied Petroleum Technologies, was created to offer environmental services and maintenance services for its own stores as well as for outside customers. Now called Susser Environmental Services, it provides a broad range of environmental consulting, maintenance, and construction management services to the petroleum and convenience store industry through another subsidiary. In late November 2005, the Forbes list of Top Private Companies listed Susser at 231st with $1.347 million in revenues for 2004, an increase of 25.2 percent.

The Long Game—2000s 203 Quality Control and Night Rides Otis Peaks worked for twenty years at Southland / 7-Eleven, rising in the ranks from store clerk to divisional vice president of the central region based in Dallas, Texas. He retired in 2001 at the age of fifty, but before the year was out, he would receive a call from Roger Smith, which led to a round of interviews and an offer to join the Susser team in Corpus Christi. Otis wasn’t sure about moving there, but he came down to Corpus on his own time and money and visited stores in the Rio Grande Valley to help make up his mind. Otis recalls, “At these locations, I talked with many people in the stores and found it almost impossible to find an employee that was unhappy or would say anything negative about the company. I knew then that they had the right stuff.” Otis came on board in January 2002 and set about seeing how the stores could be improved, as he had noticed areas to strengthen while doing his due diligence. For one thing, the stores ran into shortages—theft and labor were the two biggest expenses. “We were meeting every Monday morning,” Otis says. “All problems were put on the table and everyone gave their input for how to resolve the issues. All were totally transparent, as was the entire business—which is unique. The transparency of the whole company was 100 percent, and everyone was informed. Because of that, everyone was motivated. We would all coalesce around a solution, then we went and executed the plan. We could turn on a dime, another competitive advantage.” Otis took a hardline, direct approach to dealing with the field stores’ management, and the necessary changes got resolved—quickly. He went on night rides to check on stores, as did Sam L. and all the senior managers. “Over a six-month period, we would get on the company plane and go to stores in places such as Laredo on the weekends. We would visit as many stores as possible, then fly in the wee hours back to Corpus,” Otis said. “We addressed all store conditions, everything from the fresh look of the food to clean floors

204 Susser Holdings and a good store smell. We looked at things from the customer’s perspective, but also from an operational perspective—for example, removing all the high value bills from the register. We made sure the service was good, the staff was friendly, and that they were upselling. We were not going out to fire people; we were going out to help people fix the problems and then congratulate them—and reward them— when they did.” In the mid-2000s, Sam L. was spending a lot of time on the road, and not just at night—he needed to go on a great many day trips. Even when he was home, he spent time driving around checking gas prices. He tried to visit at least two Circle K stores every day, and once a year, along with every employee who worked in the Support Center, he worked a shift at one of the stores. But he made a point to also spend time with his three children, and he would take them on his weekend store tours, trying to commit one day a week to family exclusively. Sam L. once said, “I grew up just the way my kids have: learning my numbers around town, checking out gas-price signs. For better or worse, I’m about my kids and this business, and the closest friendships I have in this life are also engaged with my kids and my business.” Like Otis Peaks, David Engel remembers the many night rides to spontaneously visit the company’s stores: “Sam L. would take Chip, me, his dad, and some people in Operations, and we would start at seven p.m. and come back at midnight. We would inspect and review, but also meet, greet, and boost morale. Once, in Oklahoma, we went into a store at 10:30 p.m., and Sam introduced himself, and the person behind the cash register could not believe it was the company’s owner.”

The Long Game—2000s 205 Sam L. was always up front about such things, though, and not pretentious. As David added, “With the Susser family, what you see is what you get—sincere, open, wanting to take care of their employees and the community. Sam L. is also a terrific listener, a financial wizard, a great negotiator, and a strong strategic thinker, with a competitive spirit.” Sincerity cannot be faked. —Anonymous These attributes in the Susser family, and the culture they helped to foster, is part of what makes people stay with the company for so many years. Working at Stripes was nirvana. People cared and were taken care of. It’s what makes this company so fun to work for. —Otis Peaks dividends that come from taking a future-focused approach to strategy. For, The 2000s were a testament to the company’s staying power and to the • as the decades showed, they were in this business for the long haul. As Kevin Mahany stated, “We had 25 years of same-store sales increases. That’s a 25-year run rate of success.” It was this brand of success that would push Susser Holdings toward its next big benchmark: completing its IPO.

206 Susser Holdings The prudent heir takes careful inventory of his legacies and gives a faithful accounting to those whom he owes an obligation of trust. JOHN F. KENNEDY

Going Public—2006 207 Going Public—2006 To accomplish great things, we must dream as well as act. —Anatole France Quality is not an act, it’s a habit. —Aristotle I n December 2005, Susser Holdings completed the Wellspring recapitalization and was already picking up speed as it headed down the runway that would lead to its Initial Public Offering (IPO). On the fuel distribution side, the company distributed 809.5 million gallons of fuel that year and was the largest non-refining motor fuel distributor in Texas. In the years since 1999, it had added 164 new dealer locations and was among the nation’s largest distributors of Citgo and Chevron fuel. The company was also a significant distributor of Conoco, Exxon, Shell, and Texaco branded fuels. Unfortunately, the Sussers’ convenience stores were also a major target for theft and other safety issues during this time since the company had so many accessible locations. One store on I-37 near Violet Road had 116 reported incidents, while another store on South Padre Island Drive had 96 incidents. Still, the Sussers pressed forward and searched for solutions, such as working with local authorities to reduce incidents, enacting “pay before you pump” policies, and using increased lighting. National Retail Properties, an Orlando, Florida-based company that invests primarily in retail properties, had been actively working with the Sussers. The relationship between Susser Holdings and this company was developed as part of Sam L.’s growth strategy. He wanted to keep the company liquid so that it could exercise growth opportunities. In December 2005, National Retail Properties had entered into a $170 million sale-leaseback with Susser covering seventy-four retail sites. Under this deal, the Sussers entered into a twenty-year lease. Jay Whitehurst, president and COO of National Retail Properties, said: “Sam Susser and his family members have been involved in the business for three

208 Susser Holdings generations and have built a very strong company. And they’ve surrounded themselves with a spectacular management team. They operate a very solid business. One of the things that was most impressive to us was their reduced reliance on gasoline margins. Another thing that impressed us very much about them was how well-located their stores are. They have outpositioned their competition in most of their trade areas. We were also very impressed with their market dominance in south Texas. Going through the border towns in south Texas, it’s hard not to see one of the Susser convenience stores every couple of blocks.” 13 The company’s growing emphasis on the hot foods delivered by Laredo Taco Company, described as the “anti-Taco Bell,” was producing revenues of $1.1 billion by 2005 with higher gross margins than most other merchandise categories. It was actually driving complementary merchandise purchases, such as beverages and snacks to go along with the hot prepared items. In locations with a restaurant, the number of customer transactions per day were 53 percent greater than in the non-restaurant stores. New locations were also larger than traditional convenience stores, averaging 4,800 square feet and featuring a comprehensive selection of merchandise, as well as bigger parking lots to encourage traffic and increase parking. There were approximately 2,800 different products available. Stateof-the-art lighting, cleanliness, and front-door parking attracted even more customers. The company was positioning itself to benefit from prevailing consumer trends, such as a shift from supermarket shopping and the demand for hot prepared foods available quickly. Building on current growth, plans included expanding to new markets in New Mexico, Louisiana, and Oklahoma with more retail stores and wholesale dealers being targeted. 13 Brian Scott Mednick and Mitch Morrison, “Susser’s New Attitude: Texas Retailer Undertakes Total Makeover Amid SEC Filing,” CSP, October 2006.

Going Public—2006 209 Switching to Valero—2006 I n July 2006, just as Susser Holdings was moving forward to go public, Citgo, owned by Venezuela’s state-owned oil company, announced that it would cease distribution to 1,800 independently owned U.S. gas stations, including some in North Texas and Oklahoma. This was said to be due to the frosty relationship between the U.S. and Venezuelan President Hugo Chavez, who claimed the U.S. wanted to assassinate him. Citgo, however, was heavily dependent on U.S. refineries, including those in Corpus Christi, and Susser remained its largest distributor and a very strategic account. Citgo accounted for 57 percent of Susser Holdings’ fuel supply and certain terms were due to expire in 2006. The Chevron brand, which was at a quarter of the other sites, was not due for a new licensing contract until March 2008.14 Citgo’s political troubles with its Venezuelan-based parent, PDVSA, led the Sussers to explore a potential replacement for Citgo. After many months of long, hard negotiations, the Sussers soon announced Citgo’s replacement. The company signed an eleven-year fuel-supply agreement with Valero, which would provide gasoline to more than 300 of the 324 convenience stores Susser owned and operated. Susser Holdings was the No. 1 retail gasoline marketer in Texas, and the San Antonio refiner said the deal was the largest agreement with a single distributor in Valero history by fuel volume and number of sites, making Valero the No. 1 fuel marketer in Texas with 1,900 locations. Most of the 150-plus Citgo-branded fuel sites owned by Susser Holdings would be rebranded as Valero, a prominent corporate name in Texas that had experienced unprecedented refinery growth. This would take about a year, starting in September 2006. But even more changes were underway in 2006 as the plane headed down the runway, preparing for liftoff. 14 “Susser Moves Closer to Public Stock Debut in Uphill Market,” Oil Express, July 31, 2006.

210 Susser Holdings Circles Are Out, Stripes Are In At the same time Susser Holdings announced its intent to offer public stock, it also announced that the name of its convenience stores would change to the patriotically hued Stripes moniker. The vision was to have a name that the retailer could use forever, recognizing that convenience stores go through a metamorphosis every ten to twenty years. It was also important that the name not be offensive in any way in the Spanish language, given the large Hispanic population in the areas where they saw much of their business. Sam L. stated, “Our prior experience in rebranding from 7-Eleven, Tex Mart, Ice Box, and Coastal to Circle K has led us to believe that location, quality, and consistency of services offered are more important determinants of customer loyalty than store brand. We believe rebranding to Stripes will afford us more flexibility for future growth while enhancing our profitability.” An additional advantage was that the Sussers would no longer be limited by geographic restrictions set forth in the Circle K license agreement, which limited the markets where they could operate under the Circle K brand. This rebranding coincided with the expiration of a licensing agreement with the TMC Franchise Corporation for the use of the Circle K name. The upside was that the company would no longer have to pay approximately $3.5 million in annual licensing fees; however, the company expected the name changes to rebrand over three hundred stores would cost $5.5 million to $7.5 million. Still, the cost was expected to be well worth it and allowed the company to own its own brand and create its own brand attributes and reputation.

Going Public—2006 211 As the company tried to raise equity from potential investors, some were concerned about the name switch from Circle K to Stripes. But that was one thing the Sussers and other team leaders were not worried about. The management team had a successful track record of acquiring and integrating chains and also had successfully converted 7-Elevens to Circle K. By this time, the key management people had matured into their positions and knew what needed to be done. They had developed the skills to integrate companies smoothly and successfully without losing their customer base. Over the next year, the company would replace all of the Circle K signage as well as trade dress inside with its own designs and brands, such as Café de la Casa, its proprietary coffee brand. It also put billboards up across South Texas that said, “Stripes are in, Circles are out.” This advertising campaign was designed to subtly transition customers to the new name, transferring the goodwill the company had earned over the last decade as Circle K into an even stronger customer loyalty as Stripes. There were also other ways to make use of the Stripes theme. Commercials used phrases like, “You can earn your Stripes every day,” and “You can follow the Stripes down the highway to a fast, fun, friendly convenience store,” and “You have stars and Stripes forever.” There was a lot of good play off of the name. The first completely new Stripes convenience store would open December 1, 2006, at Nueces Bay Boulevard and Interstate 37 where a Circle K had suffered a fire. Roger Smith remembers that the process for coming up with the name

212 Susser Holdings “Stripes” involved a series of lengthy meetings where names were proposed, tested by both English and Spanish-speaking consumer panels, and the group agreed on a patriotic theme. Sam L. and Chip Bonner came up with the name “Stripes,” which was settled upon as the winner, and the logo was settled on after extensive work with branding firms in both Cincinnati, Ohio and Houston, Texas. Some of Sam L.’s fun-loving nature came out with his approval of the new ad campaign to roll out the Stripes brand. During the second ad campaign, “When It Hits Ya,” the ads, created by Houston-based Brand Extract, presented a brand image of a goofy, mascot-type character, Slush Monkey, with a cup of soda and a taco. He even had his own radio spots and showed up at store openings. The proprietary frozen drink offering, Slush Monkey, featured flavors such as Monkey Spit, Monkey Brains, and FroHo ChocoMallow. This doesn’t exactly sound appetizing to adults, but the kids loved it! Summer 2006 By 2006, the company’s revenue had reached $2 billion, double the $1 billion in revenue it had seen in 2002. Heading into the IPO, Susser Holdings primarily consisted of two companies—retail convenience stores (Stripes) and petroleum distribution through its network of independently run dealer (franchise) stores and unbranded commercial customers (wholesale). When going public, the investment analysts did not understand how to value the wholesale business and therefore separated the two entities into two distinct companies. So in 2012, it was decided to structure the wholesale operations into

Going Public—2006 213 a Master Limited Partnership (MLP) that included Stripes real estate holdings and a separate entity for the standalone Stripes retail stores. In May 2006, the Susser family incorporated Susser Holdings Corporation under a Delaware charter. In late October 2006, Susser Holdings set the price of its upcoming IPO to $18 per share for six million shares. That was expected to raise approximately $90 million. Merrill Lynch & Co., JPMorgan, Jefferies & Co., and Morgan Keegan & Co. (now Raymond James) were initially listed as the underwriters for the offering. The stock would be listed on NASDAQ as SUSS. The IPO was intended primarily to retire debt and to provide additional capital for continued growth and expansion. Reducing debt would give the company more financial flexibility. The public offering would also help the company become more widely known and attract more highly qualified employees by enabling it to offer restricted stock units, stock options, and other incentives that aligned employees’ interests with shareholders. Sam L. laid out a six-part roadmap for how he and his team would use the capital to grow the business. He vowed that he would 1) double EBITDA within five years, 2) continue to grow same-store sales and same-store cash flow, 3) continue to build big-box stores with 20 percent unlevered ROIs, 4) switch from a licensed national brand to the new proprietary Stripes brand, 5) grow foodservice sales, decreasing reliance on cigarettes, and 6) continue to execute an acquisition strategy. In the SEC filing, Sam L. said, “We believe our retail strategy, which emphasizes merchandising, foodservice, and technology, is superior to our competition. We are less dependent on cigarettes and motor fuel than the industry as we focus our in-store merchandise mix on attractive product categories, such as beverages and the Laredo Taco Company food service.” The Susser plan was ambitious, but Sam L. knew his team was hungry for growth. He explained later, “Our company and our team are built for growth. We would atrophy if we weren’t able to keep pursuing growth opportunities. A retail company cannot stay at one size and be successful. You grow or you die.” The Sussers were determined to expand and adapt, and they were ready for the IPO… cleared for take-off.

214 Susser Holdings The IPO I n October 2006, Susser Holdings went public on the NASDAQ stock exchange under the symbol SUSS. Meanwhile, a new and distinctive brand was rolled out for the convenience stores: Stripes Convenience stores were recognized by the colorful geometrically designed Stripes logo and became known for their value, quality, and convenience. The cup is iconic in its design, and a Stripes 64-oz. cup is on display at the Smithsonian Museum. Susser priced its IPO at $16.50, and it closed at $18 the first day of trading, a gain of 9.09% on a day when the Dow Jones closed higher than 12,000 for the first time. After going public on October 24, the company raised about $113 million in new capital from the sale of the common stock, about $20 million more than expected. Susser Holdings went public on NASDAQ first as SUSS. Six years later, when Susser Petroleum had its IPO on the New York Stock Exchange as SUSP, the parent company, including the Stripes stores, moved from NASDAQ to the NYSE at the same time . Among the first-day investors in Corpus Christi was Leon Loeb, owner of Land Lord Resources, who said he was pleased with the company’s opening day performance. Loeb, who was related to the Susser family, did not reveal how many shares he bought but said, “I think probably a rising tide makes all the boats go up, but not if they have holes in them. Obviously, this company is not sinking, and I think this will be a good long-term

Going Public—2006 215 investment.” 15 Sam J. was a key member of the board of directors and Sam L.’s mentor but had no day-to-day operating responsibilities by this time. Sam L.’s Uncle Jerry was in charge of the real estate acquisitions and selection, negotiated losses, purchases, and anything having to do with real estate. Stripes usually bought the land on which to build new stores, financed the buildings, and then engaged in sale-leasebacks to support its growth strategy. At any given time, it might own the land, buildings, and equipment on about half of its portfolio. SUSS used the IPO capital infusion to fund the growth capital needed for additional Stripes stores, store remodels, and new store builds so that the company could continue to gain market share. Industry analysts as well as the Sussers’ competition began to pay attention. Susser Holdings was one of only a few convenience store retailers that had gone public. But Jeff Morris, president and CEO of the Dallas-based Alon USA, which had gone public earlier that year, had this to say: “Sam was competing with the big boxes long before many were complaining about them, and that was one of the things that caused him to develop an exceptionally competitive model. He stands toe-to-toe with all the big boxes and he’s done very, very well, [and] developed a model that is very successful in that environment. I think that’s indicative of what you are seeing now. It’s one of the best-managed convenience store chains in the country, and that’s a credit to Sam. I think that the investment community will recognize that, and they are recognizing that. In any industry, there are better-managed [companies] and less well-managed [companies], and in our particular industry, the convenience store industry, I think Sam is one of the best.”16 15 Elvia Aguilar, “Susser Earns its Stripes with IPO,” Corpus Christi Caller-Times, October 20, 2006. 16 Brian Scott Mednick and Mitch Morrison, “Susser’s New Attitude: Texas Retailer Undertakes Total Makeover Amid SEC Filing,” CSP, October 2006.

216 Susser Holdings The Year After—2007 Heading into 2007, some fresh energy had been injected into the company, as Ron Coben was named as the new executive vice president and chief marketing officer in December 2006. Coben, president of Think So LLC, an executive-level marketing consulting company, had worked closely with Susser Holdings during 2005 and 2006 as it developed its proprietary Stripes brand and enhanced the Laredo Taco Co. brand. This newly created position was a natural move after going public, sending a message to investors that the company was striving to become more professional while at the same time sending a message to the market that it was looking for new opportunities. In the first quarter of 2007, merchandise sales increased to $93.4 million, up from $85.8 million a year before, while total revenues increased to $528.6 million. Stripes opened six new stores with LTC restaurants in the first quarter and expected to add a total of 25-30 in 2007. In wholesale fuel, it added six new dealer sites and discontinued two for a total of 371 in operation at the end of the first quarter. It expected to add 25-35 new dealers in 2007. In 2007, Susser Holdings had 350 convenience stores; 325 of these were under the name Stripes. Same store sales had grown 7.7% that year and 18 new stores were opened. Susser Holdings was ranked the largest wholesaler of petroleum products in Texas, selling gasoline to almost 400 other convenience stores. Plans for the future were to add at least 30 more wholesale clients that year. The company’s strategy was to focus on cleaning, training, and excellent computerization at all stores. They believed that clean stores were appealing to all who visited the stores and worked there, and that the more training employees had, the better they would be able to serve customers. As the Sussers knew, customers understand when an employee is well trained and knows how to care for a store and interact with professionalism and courtesy. As well, computerization allows the company to know how to price items for sale, what will give the best profit margin, and helps to manage operating expenses. All of these professional efforts did not go unnoticed. In May 2007, Jerry, vice president of real estate for Susser Holdings, and Sam J., director of Susser Holdings, were two of five individuals inducted into the Corpus Christi Business

Going Public—2006 217 Hall of Fame. The others were Jeff E. Bell Jr., philanthropist, and Marvin L. Berry and Laura Berry of Berry Contracting, Inc./Bay Ltd. Then in September 2007, David P. Engel, principal of Corpus Christi-based Engel and Associates, LLC, a firm providing business management consulting services to public and private companies in the areas of financial performance improvement, acquisitions, and divestitures, was added to the Susser Holdings Corporation Board of Directors. This expanded the number of seats on the board to seven. The other board members were Sam L. Susser, Sam J. Susser, William F. Dawson Jr., Jerry E. Thompson, Bruce W. Krysiak, and Armand S. Shapiro. The IPO had been successful. As the company headed into the last few years of the first decade of the 2000s, there were blue skies ahead.

218 Susser Holdings If you take care of your employees, they will take care of your customer better than anybody else. KIP TINDELL CEO, CONTAINER STORE

Finishing Strong—Last Years of the 2000s 219 Finishing Strong— Last Years of the 2000s No one cares how much you know, until they know how much you care. —Theodore Roosevelt Excellence is in the detail. Give attention to the details and excellence will come. —Perry Paxton Businesses often forget about the culture, and ultimately, they suffer for it because you can’t deliver good service from unhappy employees. —Tony Hsieh, CEO, Zappos I n the last years of the first decade of the new millennium, Susser Holdings rode the momentum generated by its IPO. In 2007, the company opened eighteen new retail locations and closed seven as part of its ongoing strategy to upgrade the size, quality, and location of its facilities. Thirty new units were added to the wholesale network, and the company discontinued branded wholesale supply to ten locations. Susser Holdings had 350 convenience stores; 325 of these were under the name Stripes. Same-store sales grew 7.7 percent. The company had over six thousand employees and ranked among the twenty largest convenience store chains in the United States. Susser Holdings was ranked the largest wholesaler of petroleum products in Texas, selling gasoline to almost four hundred other convenience stores. •

220 Susser Holdings Acquiring Town & Country Food Stores Town & Country Food Stores, an employee-owned chain of convenience stores based in San Angelo, Texas, was founded in 1959 in Austin, Texas, by Paul Chintamani. But during the early 1960s, the chain found itself in financial trouble due to overexpansion. Two company employees, H.C. “Harold” Gibbs and F.L. “Steve” Stephens purchased six San Angelo stores as well as one in Del Rio, Texas. Chintamani continued to hold a 51 percent stake in the company. By the 1990s, Town & Country was a well-run chain and very profitable. They tried to sell in 1999, and the Sussers submitted a bid, fully financed by Bank of America and Morgan Keegan. However, Town & Country’s owners instead took that price and offered it to three sons-in-law, a cousin, and employees, and let them have it for the Sussers’ offering price of $120 million through an employee stock ownership plan. After this, the chain grew a bit, was better managed, and did very well with the oil boom in the Permian Basin oil patch. By 2006, Town & Country had over 168 locations spread throughout Texas and New Mexico and was bringing in over $850 million in yearly revenue. In November 2007, despite the frustration earlier suffered when they had submitted a bid eight years before, the Sussers quietly bought the Town & Country Food Stores chain for $361 million. This was the largest dollar and storecount acquisition in the company’s history and triggered a rise in the company’s stock from $16 to $24. This was also Susser Holdings’ tenth significant acquisition in the past nineteen years and the fourth that had doubled the size of the company. It made Susser Holdings one of the largest convenience store operators in the Southwest, now with more than five hundred stores. “This was a very transformative event,” Rocky Dewbre has said.

Finishing Strong—Last Years of the 2000s 221 Alvin New Heads Retail Operations When Susser Holdings acquired the 168 Town & Country Food Stores, Alvin New, CEO of Town & Country, was named executive vice president and chief executive officer of retail operations. New moved from San Angelo to Corpus Christi and assumed direct responsibility for retail operations, marketing, human resources, information technology, maintenance, retail fuel marketing, and food service. He replaced Roger Smith, who had been with the company since 2001 and was credited with Laredo Taco Company’s success. Roger was an extremely successful and loved executive, but he recognized Mr. New wouldn’t agree to sell the company to the Sussers unless he could have the top job for the retail division. All Town & Country locations were rebranded to the Stripes brand beginning in the fall of 2008. The seven small Village Market grocery stores, however, were not rebranded, and the twenty-two Subway franchises and four Godfather’s Pizzas that the Sussers received in the deal would also remain. The Sussers originally planned to integrate the Laredo Taco Company offerings with Town & Country’s Country Cookin’ program, but eventually decided to keep them separate. The Country Cookin’ cuisine would be replaced by Laredo Taco beginning mid-2009. Devin Bates, the former chief financial officer and chief information officer for Town & Country, remained as senior vice president and chief information officer at Susser Holdings for over a year, but Mr. New resigned after six months. The pace of change and worth ethic at Susser was simply too much for many of the former Town & Country leadership group.

222 Susser Holdings 2008—Economic Incentives I n late January 2008, Susser Holdings received $640,000 in tax incentives from the Corpus Christi Regional Economic Development Corporation and the city’s Business and Job Development Corporation (4A Board). The incentives were paid in five annual installments of $128,000 starting in 2009 to help consolidate the San Angelo Office to Corpus Christi and fund a multimillion renovation of a former Wal-Mart as the Stripes Support Center. The recent acquisition of Town & Country brought eleven of that chain’s employees to Corpus Christi. The Sussers also committed to create at least thirtysix new local jobs during the next five years, and the expanded store base was expected to create a need for more employees in support services. By 2009, Susser Holdings also planned to invest over $5 million in renovating the facility, new furniture, fixtures, and equipment to relocate the company’s headquarters. DeSutter Succeeds New I n June 2008, Steven Charles DeSutter, adviser and interim executive vice president of operations at Quiznos, assumed the position of president and CEO of Stripes LLC, replacing Alvin New who had left in March. Steve would also become executive vice president of Susser Holdings Corporation. At Quiznos, he was credited with developing and implementing a guest-focused operating system that improved customer service. He also pioneered a new catering and delivery service to extend the stores beyond their four walls through his position in the investment firm of TurnWorks, Inc. In addition, he had worked for many years at British Petroleum and had a broad range of relevant experience. Sam L. said of him, “Steve is exactly the kind of talented executive we wanted to attract to help us complete the integration of Town & Country Food Stores and move

Finishing Strong—Last Years of the 2000s 223 those stores to the single Stripes brand.” Steve would work at Stripes from 2008 to 2014. He recalls those early days when he first met with the Sussers: “I had one other offer to work as a partner with a private equity firm. A recruiter called me and said, ‘You need to meet Sam L. Susser. He runs a convenience store chain.’ I wasn’t sure that was for me.” Nevertheless, Steve drove from Houston to Corpus Christi and walked up to the Sussers’ current offices. He opened the door, and then had to walk around to be sure he had the right office. “I could not believe how overcrowded it was,” he recalls. “Boxes everywhere, and one room had twenty-five people all packed in, using it as a single office.” This can’t be a publicly traded company, he thought to himself. In his first meeting with Steve, which lasted seven hours, Sam L. kept repeating his underlying retail philosophy, learned from his grandfather and father: “Retail is detail.” “I can handle detail,” Steve replied. “This won’t be that complicated.” “This is detailed detail!” What most impressed Steve, he later reflected, was Sam L.’s authenticity and deep insights: “He was genuine, smart, and knew the business up, down, and sideways.” But on the drive back to Houston, Steve still was not sure about making the switch. The recruiter called and asked him, “What do you think?” “Have you been to their offices?” Steve replied. “A little sparse,” the recruiter acknowledged. “It’s a jungle. Way overcrowded.” But a week later, Steve visited with Sam L. again, and Sam L. showed him all the detailed financials. And they took him to see the future location of the new office—a remodeled Walmart. Finally, Steve caught the vision that this company was going someplace. And Sam L. had likewise decided that Steve was the guy, even though he had not yet met the other board members. Sam L. made an offer and insisted that he and Catherine come to Houston and visit with Steve at his home. “He wanted to make sure I was the real deal,” Steve says. “I was in my office

224 Susser Holdings in my home when Sam made the offer. He brought his children also, and they swam in our pool.” This would be the start of a great friendship. Over the next six years, Steve became a member of the family: “The joke was that I was ‘De-Susser!’ Sam L. and the family were my family. It was all about friendships.” In many ways, Steve DeSutter was the bridge-builder between father and son. Sam J. would say, “I want you to go see Sam L., and you tell him to do what you just said to me.” “Why don’t you tell him yourself?” “I did, but he won’t listen to me.” Jackpot! Usually the company grew through the steady pursuit of excellence and the ability of its leaders to recognize and take hold of opportunities. But a little good luck never hurt, either. Susser Holdings was the recipient of some very good fortune in October 2008 when the winning number for an $18 million lottery was sold at its store at 7122 S. Staples Street. The store where the winning ticket is sold customarily gets 1 percent of the winnings, so the store collected $180,000. The money was distributed to Susser Holdings in December and went into the company’s general operating fund, and that particular store was able to include the money as part of its yearly revenues, a calculation that determines the store managers’ bonuses… which received quite a boost! Leading with Passion Throughout these years—and others—the Sussers knew they could not count on luck to see them through. Therefore, they showed a determination to lead with an eye for detail, but as Sam L. had reiterated to Steve at their first meeting, they also led with passion. It was all in, or nothing. There was no halfway pursuit of success, even if that meant looking under the rug where most people

Finishing Strong—Last Years of the 2000s 225 swept things… or shining a light on the darker, less appealing places. For example, Sam L. frequently wanted to conduct visits to the stores on Sunday night. He knew that this was the best time to see the stores in their worst condition—right at the close of a busy weekend, when the shelves were depleted, the coolers low on stock, the employees tired and worn out. Almost no vendors make deliveries on Sundays so that was the best time to see what customers experienced, when inventories were at the absolute minimum level. “It was not uncommon for Sam L. to call me on Sunday night because he wanted me to go with him to visit stores,” Steve remembers. “He wanted me to see the stores, with low stock, through his eyes.” Sometimes Sam L. also brought along his young son, Sam E., who enjoyed going to the cash register and looking for coins that had fallen into the cracks and been overlooked. He got to keep any coins he spotted. Sam L.’s passion also encompassed the food they offered. He would often take Steve to local taquerias—Mexican restaurants that could potentially be learned from. “Some of these were restaurants that normally I would not go to,” Steve says. “But they were the real deal, which meant we could taste the food so that we could make our own food more authentic. Uncle Jerry was right in line. He would bring me to various stores and show me a good tortilla and a bad tortilla. And he had an amazing eye for real estate, too.” They were open to tweaking the formula for success and allowing their food offerings to be fine-tuned from one location to another. If a cook at a Stripes in Brownsville, for instance, wanted to add spices to a Laredo Taco Company item to match it to his cherished family recipe, that would be just fine—because probably the local customers would love it, too. “What I also learned was how to understand the merchandise,” Steve says. “In the restaurant business, they look at the sale per ticket and profit per ticket. Sam L. looked at traffic and profit per customer. He is a very aggressive merchandiser.” Stripes was built around the community and the customer, which meant knowing the customers, the trends, and their buying tendencies were of the utmost importance. The average customer that came into Stripes and bought food would come in about 4.5 times a week (versus 3.2 times per week for Stripes

226 Susser Holdings customers if they didn’t buy fresh food from Laredo Taco Company). Before Laredo Taco Company’s fresh food was implemented in the Stripes stores, the typical c-store customer showed up 85 percent of the time for gasoline but would not go into the store. With Stripes, they were coming inside 83 percent of the time. “We flipped the model,” Steve says. “That’s what made Stripes so successful.” Our intention is to become woven into the fabric of the customer’s life. —Sam L. Susser Passion on the Road Steve also recalls doing road shows for current investors and potential investors. He would travel with Sam L., who undertook fastidious preparation to deliver the message clearly and concisely through discussions, whiteboard explanations, and PowerPoint charts. “When we were finished after a few days on the road for this, we left with the confidence that we had done it right,” Steve says. “Sam L. gave the facts, and they were correct—not overly guarded, not overly optimistic. They were spot on, always. That was his DNA.” Steve remembers one time that he and Sam L. were doing a follow-up offering—visiting to make the pitch to a company that had not signed on before. In a Fidelity office in Boston, Sam L. was insistent that Fidelity should not underestimate Texas and its growth. At the time, the Great Recession was ongoing, but Texas did not experience the severity of the economic slump as much as other areas of the country did. Local economies continued to grow, population growth continued in Texas, and oil was booming. Susser Holdings benefited, and the company’s numbers were moving up, not down. Yet Morgan Stanley had missed the initial offering and then the second offering, as well. “They did not seem to be getting our pitch,” Steve says, “and I remember Sam L. telling them in a loud voice, ‘Well, don’t miss it this time!’ Then Sam L. spread his arms across the table for effect and said, ‘If you’re not selling everything you have and investing in stock in Texas companies, you are a fool!’ He

Finishing Strong—Last Years of the 2000s 227 had a deep belief in Texas and in Stripes.” Another time, at Fidelity’s brand-new gorgeous headquarters in Boston, Sam L. excitedly grabbed a Sharpie permanent marker and walked up to a wall, thinking it was a whiteboard, and proceeded to diagram out his case. He was deep into his explanation when he realized it was not a whiteboard. Well … they would have a permanent visual aid! We will take market share every single quarter. —Sam L. Susser 70th Anniversary I n an open letter to Corpus Christi, Sam L. thanked the city for seventy great years, reporting that Susser Holdings Corporation had reported a record $16.5 million in net income for fiscal year 2008. That year same-store sales grew over 6 percent, and he thanked loyal customers for their continued support. Susser Holdings also moved into a new headquarters and retail support center and had a record year in terms of investment into the community, in both dollars and hours donated. The voters of Corpus Christi had voted to pass bonds for investments in infrastructure and education, and Sam L. applauded their efforts while looking forward to the continued growth and development of the area. In reflecting on how far Susser Holdings had come, as well as looking to the future, Sam L. said that he believed the key ingredient to success was to focus on convenience. He said, “Convenience is what the company sells, both with the inside offerings and where the stores are located.” To that end, he was building about fifteen new sites on key corners to add to the convenience that

228 Susser Holdings the chain offered. Sam L. explained, “We are trying to grow with assets that are first and foremost complementary to our network and will complement strategies of same-store sales growth and new store development.” 2009 Texas Business Hall of Fame The Susser family was inducted into the Texas Business Hall of Fame in 2009. The Hall of Fame Foundation’s stated mission is to recognize the accomplishments and contributions of business leaders and perpetuate the values of entrepreneurial spirit by inducting honorees and providing scholarships. The induction dinner was held in Houston, and other inductees were James T. Hackett, chairman, president, and CEO of Anadarko Petroleum Corporation; Philip Romano, Romano Concepts owner; and Martha Turner, president and CEO of Martha Turner Properties. The Sussers were the fourth family to be inducted into the Hall of Fame since 1983. Grand Spirit Award I n October 2009, Stripes was named the winner of the Grand Spirit Award for Community Outreach, a new retail industry award program launched by Convenience Store News. The CSNews Spirit Awards celebrated convenience store retailers that were involved in community service programs aimed at bettering the lives of people in the markets they serve. Winners were honored in a special awards event in Houston on November 4. •

Finishing Strong—Last Years of the 2000s 229 About to start a new decade, the Sussers knew that numbers aren’t everything; still, in 2008 and 2009, the numbers had certainly been good. About $16.5 million was recorded in net income for 2008, and the company had $3.3 billion in sales. Of the total revenue for 2008, 20 percent came from wholesale fuel sales while 80 percent came from the retail side of the business. The company had 8,000 employees. By 2009, Susser Holdings had 525 retail stores with restaurant service available in more than 290 of its stores. The company also supplied branded motor fuel to about 380 independent dealers through its wholesale fuel division. Financing and a healthy balance sheet were very important to this growth. Developing strong relationships with the high-yield bond community and real estate investors gave Susser Holdings access to the capital it needed. Being public also gave the Sussers access to capital, something Sam L. considered a definitive factor in the company’s future prospects. The strong support of its lenders and investors as well as a favorable bond rating allowed Susser Holdings to have access to a $120 million credit line, which was used primarily for operations. Other lending partners allowed access to acquisition-targeted funding in the form of bank-term debt, high-yield debt, and sale leaseback, in addition to the chain’s own cash and equity. The Sussers would be the first to tell you that their success was predicated on more than savvy business decisions. The company was built on foundational values and teamwork, and everyone involved saw its operation as a noble mission to do things right, care about the customer, and help people to have the best possible experience. If the product was better and the service was better, they would be filling a gap in the market. And if they could do this, then success would be guaranteed. Teamwork is really a form of trust. It’s what happens when you surrender the mistaken idea that you can go it alone and realize that you won’t achieve your individual goals without the support of your colleagues. —Pat Summitt

230 Susser Holdings “I’ve had the chance to see the contrast between many different companies and leaders,” Steve has said. “The constant with Susser Holdings is how they operate. They never lose sight of the customer, and they never lose sight of the operator, the store, the local manager. This is the biggest gap between them and their competitors.” One way to maintain this gap was to never settle, to never believe that “good enough” was sufficient. The company’s Board of Directors was relentlessly dissatisfied with the status quo which ensured that Sam L. was perpetually studying how to improve. “How can we make it better?” he would ask. He also considered “What do our customers want?” and “How can we make this a better place to build a career for our team?” These questions—and their answers—meant success would continue to come their way. We achieved the holy grail of retail: We hit 27 straight years of positive same-store sales. —Sam L. Susser

Finishing Strong—Last Years of the 2000s 231 We achieved 27 straight years of positive same-store sales. SAM L. SUSSER

232 Susser Holdings All wealth is the product of labor. JOHN LOCKE

Reaping What’s Been Sown—2010s 233 Reaping What’s Been Sown—2010s Patience is bitter, but its fruit is sweet. Jean Jacques Rousseau Of all pleasures the fruit derived from labor is the sweetest. —Luc de Clapiers The first decade of the 2000s had proven to everyone that Susser Holdings was not a company confined to success in the twentieth century. In those ten years, growth and acquisitions had propelled the company forward and positioned it for additional expansion. Now, in the 2010s, it was time to see the fruit of many labors coming to pass—the investment made over many years was leading to recognition and status befitting the countless hours of blood, sweat, and tears poured into the company and its stakeholders. Even emerging from a national recession, the seeds planted had been faithfully watered, and now they were coming up roses. At the same time, the Sussers did not believe in resting on their laurels. They were determined to continue the push, continue the charge, to bring Susser Holdings once more to new heights. Good enough was neither good nor enough. There was always room for improvement, for advancement… and advance they did. current path of independent growth. In 2008, 7-Eleven wanted to buy Susser Of course, it was never a certainty that Susser Holdings would continue its • Holdings, but the offer was declined. In the 1990s, Blackstone wanted to back Sam L. to buy Circle K for $600 million, but Couche-Tarde, a Canadian convenience store chain, outbid the Blackstone/Susser group and bought Circle

234 Susser Holdings K instead. Couche-Tarde also wanted to buy Susser Holdings at a moderate price now that it was a public company. In the end, the deal was once again declined. Sam L. weighed every deal carefully and proceeded in the best interests of Susser Holdings, expanding where it was wise to do so. As Bruce Krysiak said, “Sam L. continued to build the company through acquisitions, and Wall Street loved him.” • The team, from left to right: Steven DeSutter, president and CEO of Stripes; Kevin Mahany, VP of merchandising; Richard Sebastian, Senior VP of retail operations; Otis Peaks, VP of human resources; E.V. Chip Bonner, executive VP; Rod Martin, VP of marketing; Sam L. Susser, president and CEO; George Mrvos, VP of IT; David Wishard, VP of business development; Wendell Funk, director of category management; and Ben Hoffmeyer, senior category manager of foodservice.

Reaping What’s Been Sown—2010s 235 2010 National Association of Convenience Stores Show I n November 2010, Sam L. made a special appearance at that year’s National Association of Convenience Stores Show, where he shared the stage with Kyle Krause, president and CEO of Kum & Go. Sonja Hubbard, CEO of E-Z Mart Stores in Texarkana, Texas, served as moderator for a Q&A after each retailer made his presentation. Sam L. was asked to speak about the “value of the brand” because he had stores that sold both branded and unbranded motor fuel. He agreed that over time brand loyalty had diminished among consumers as big box stores had helped consumers get more comfortable with unbranded fuels. The company was doing well but had still been impacted by the recession. After the first quarter of 2010, Stripes reported a 2.5 percent increase in same-store merchandise sales, but a $5 million net loss. Sam L. reported that the company had moved past the recession and the Texas economy as a whole was also recovering. Total company merchandise sales were up five percent to $191 million and retail store fuel volumes were 183.1 million gallons, a 2 percent increase from a year before—and any gain in the wake of the recession was an achievement. By the second quarter of 2010, Susser Holdings was reporting record fuel profit. Typically, the company was accustomed to seeing about a 15-cent profit per gallon on fuel sales, but it saw a 24.8 cent per gallon profit in this quarter. This upward leap seemed to reflect the fact that commercial activity was up because of the strength in diesel. Gross profit was $133.9 million, a 24.2 percent increase from the year before. The rest of the year proved to be their best year ever.

236 Susser Holdings

Reaping What’s Been Sown—2010s 237 2011 Five-Year Assessment and Interview I n 2011, Sam L. looked back on his plan for expanding and growing Susser Holdings, and in an exclusive interview with Convenience Store News, he shared how the family company had not only met his targets but exceeded them. Since going public in October 2006, the company had more than doubled its adjusted EBITDA from $45 million in 2006 to $120 million in 2010, turning in its 22nd year of consecutive same-store sales growth. It had also built 53 new big-box stores since 2006, with those open three-plus years producing over 20 percent cash on cash unlevered returns on investment (“ROI”). Additionally, the chain grew its foodservice sales to $166 million in 2010— from $71 million in 2006. It integrated three acquisitions, bringing its 2011 store count to 525 locations in Texas, Oklahoma, and New Mexico. The company also supplied fuel to 372 branded and unbranded dealers, five unattended fueling facilities, and a significant number of other commercial customers. The Stripes brand was rolled out and completed as of March 2008 when the stores in San Angelo, Texas, were converted. Market research revealed in 2011 that Stripes was already the No. 1 recognized convenience store brand in its markets. It also showed that Stripes was one of

238 Susser Holdings consumers’ favorite c-store brands. Stripes stores were the most visited c-store in their markets with 97 percent of the respondents saying they visited a Stripes in the last year. In the interview, Susser said that achieving these goals was a result of several tenets that had been ingrained in the company over the years. The first was a firm conviction that there was inflation in operating expenses in the convenience store business. The company had to find a way to grow the top line to cover those added expenses. Secondly, Susser executives were big believers in market share as a means to create efficiencies in management, supply chain, and marketing. Lastly, the company’s ownership realized the importance of investing back into the business, including the legacy stores that had been around for a long while. He further explained: “We treat every store like a brother. They’re not statistics for us; they’re special. And we try to invest in each store, recognizing that it brings something special to our business.” In addition to physical presence in the market, Stripes was also noted for maintaining a consistent marketing presence, using a mix of media to drive traffic into the stores. Communication also aimed to connect with customers at a “value level,” always trying to see what motivates customers and how Stripes could meet those needs. By 2011, Stripes had supersized stores in addition to their big boxes of 4,800 square feet. These supersized stores were between 6,000 and 10,000 square feet and offered dedicated truck diesel islands. There were more than 60 of these, and the company intended to build more. Laredo Taco Company was offered in just over 300 stores as the Country Cookin’ restaurants left over from the Town & Country acquisition were converted to Laredo Taco Company by March 2011.

Reaping What’s Been Sown—2010s 239 Smart IT and Staff Persons of the Year Don’t ever be afraid to hire someone smarter than you. —Sam L. Susser I n 2011, all thirty-five employees who made up the information technology department at Susser Holdings were recognized at the company’s annual meeting as “Staff Person of the Year.” The utilization of technology was gaining more momentum as a way to deliver efficiencies and growth for the company. The IT department focused on ways to speed up processes and decision-making. Also, Stripesnet was rolled out as a way to communicate with all stakeholders in the company. Manager Web Access, launched in 2009, delivered important information to managers without their having to search for it. It allowed a manager to monitor clocked-in workers and access online job applications to fill vacancies. Fact Finder, added in 2010, gave them access to data for analysis, and Cashier Analysis drilled that down even further, allowing a view down to an individual shift level. This allowed managers to identify possible problems that impacted things like employee morale, turnover, and so on. All 525-plus stores had a common point-of-sale system. New Stock Issue I n late November 2011, Susser Holdings announced plans to sell 3.5 million new shares of its stock to fund an accelerated store-building program for 2012. Plans were to add 25-30 Stripes convenience stores in the coming year. The Sussers had recently reported that the company was building up land reserves to add new ground-up stores if economic conditions improved. The newer stores would feature Laredo Taco restaurants and would be 4,900-6,800 square feet, twice as large as those built in 2000 requiring a minimum of two acres and 65 parking spaces. Company data analysis indicated that larger stores tended to generate two to three times the cash flow of the older models. Proceeds from the sale would also be used for other corporate purposes such as paying down debt.

240 Susser Holdings The price of the stock was set at $21.75 per share in early December when the transaction for the public offering was completed. The company would receive its money on December 7, 2011, but the underwriters had a thirty-day option to sell an additional 525,000 shares. By the end of 2011, the company had completed its best sales year ever. Revenue approached $1.3 billion, up 28.5 percent from 2010. Susser Holdings picked up more than 100 new dealers for a total of 565 independent dealers to whom it sold wholesale fuel under long-term contracts. Same-store merchandise sales increased 5 percent with $219 billion in merchandise sales. 2012 Becoming a Fortune 500 Company I n May 2012, Susser Holdings was named to the Fortune 500, the only company in Corpus Christi to gain this prized position. Susser was also the only Corpus Christi-based company that traded on a major exchange. Susser Holdings rose from a rank of 577 in 2011 to 486 in 2012. It would rise to 439 in 2013. It was also recognized for having the fifth-largest gain in shareholder return on company stock among companies on the 2012 list, posting a more than 63 percent return. Susser Holdings was ranked eleventh in the top twenty company-operated convenience store chains in the United States according to Nielson TDLinx. At this time, Susser Holdings had more than 540 convenience stores.

Reaping What’s Been Sown—2010s 241 Susser Petroleum IPO I n June 2012, Susser Holdings’ wholesale fuel distribution business, Susser Petroleum Partners, LP, filed plans for an initial public offering of up to $200 million in common stock. The Susser Holdings board of directors had decided to spin off the fuel distribution side of the business because it was more stable than the retail side, which was subject to volatility with fuel margins. The stock offered to the public represented 49.9 percent limited partner interest; Susser Holdings would still own the majority of the partnership’s shares. The company planned to create a Master Limited Partnership (MLP), a publicly traded entity in which investors could buy shares and become limited partners in the business. The partnerships pay shareholders earnings not necessary for operations and maintenance. MLPs were becoming more common during this time with a number being created by pipeline operations. This format had gained popularity since about 2010 because the entities don’t pay taxes at the partnership level, so they are able to pass on more earnings to investors. On average, they tend to pay a dividend yield of over 6 percent, which leads to higher IPO valuations, and incentivizes capital raising for MLP issuers. Mary Sullivan, chief financial officer of Susser Petroleum Partners and Susser Holdings, later gave this assessment: “Susser Petroleum was undervalued being part of Susser Holdings. By putting it into this MLP structure, we’ve been able to unlock that value. The second thing it allows us to do is raise capital through the MLP.” Rocky Dewbre recalls, “In 2011 I was in a conference and an attorney was giving a talk about MLPs and the qualifications and tax benefits. I realized this made a lot of sense for Susser Holdings.” After much discussion, a board presentation, analysis,

242 Susser Holdings and planning, a structure was proposed that could work. The MLP was created in 2012, and it was so successful that many others in the industry took note of this innovative, even ground-breaking approach. “We were the first company to apply this MLP structure to the retail sale of motor fuel via c-stores,” Rocky says. Many other c-stores soon followed in Susser Holdings’ footsteps. The company was offering investors an 8.8 percent yield according to the prospectus. The shares would be listed under the symbol SUSP and would trade on the New York Stock Exchange or the NASDAQ. The remaining common stock would move to the NYSE, trading under SUSS. Sam L. intended to use the generated $195 million in funds to repay the parent company for certain capital expenditures and to buy investment-grade securities, initially U.S. Treasuries, which would be used as collateral for Susser

Reaping What’s Been Sown—2010s 243 Holdings to secure a new loan. Susser Holdings planned to use its cash contribution from the IPO to build or acquire new convenience stores and reduce outstanding debt. Sam L. said of the IPO: “We believe this transaction will allow us to reduce our cost of capital and further diversify our access to capital to fund our growth strategy.” Upon completion of the IPO, Susser Holdings would purchase all of its motor fuels from Susser Petroleum Partners. The partnership also distributed Valero Energy, Chevron, Citgo, Conoco, Exxon-Phillips, Mobil, Shell, and Texaco branded motor fuel as well as other petroleum products, such as propane and lube oil. On September 20, the IPO for SUSP was launched at $20.50, and in the first day of trading, 9.5 million units (87 percent of outstanding shares) were traded. The stock’s price ended on an upward swing, closing at $22.91 by the end of the day, 12 percent higher. When the offering closed, the underwriters got a thirty-day option to buy 1.425 million additional common units. Major banks that brought the company public were Bank of America/Merrill Lynch, Barclays, Wells Fargo, and UBS. The next day, the stock closed at $23.08, valuing the firm at $504 million. Over the initial four days, the company earned $209.8 million, selling 10.9 million units. The stock closed at $23.09 on September 25, about 13 percent higher than its opening price four days earlier. Appearance on CNBC On October 11, Sam L. appeared on CNBC’s “Mad Money with Jim Cramer” in the show’s “Executive Decision Exclusive.” He shared information about the company and the recent fuel partnership IPO. Sam L. said of the petroleum partnership: “Susser Petroleum is all about connecting with buyers… including the gas stations of its parent as well as other small mom-and-pop operations; ninety percent of their volumes are based on long-term fee-based contracts where they get a fixed profit of 3.4 cents per gallon that they ship. That’s the consistent utility-like business model that we really like.”

244 Susser Holdings He also shared that Susser Holdings planned to build 26 Stripes stores by the end of the year, with projections for 28-35 more in 2013. When Cramer speculated about the possibility of Susser expanding nationwide, Sam L. said that it would stay in its core markets of Texas, New Mexico, Louisiana, and Oklahoma: “Our business has wonderful scalability…. We think we will continue to expand our footprint. These markets have fabulous demographics and they are very, very large. It’s an enormous territory with major population centers. We see the opportunity to build a larger, stronger business, continuing in our trends in the coming years.” He told Cramer that the company would have test sites for natural gas pumps within the next couple of months and that it was working with natural gas companies in the Permian Basin and the Eagle Ford Shale region. Ringing the Bell at NYSE It’s a marathon, not a sprint —Anonymous On December 21, 2012, Sam J. Susser, Sam L. Susser, and Eli G. Susser, age nine, toured the New York Stock Exchange. Sam L. rang the historic bell to open the day’s trading. On that day, Susser Holdings stock (SUSS) was transferred to NYSE from NASDAQ Global Select Market. merchandise sales grew approximately 6.6 percent, up from 6 percent in In 2012, it was yet again a year of growth. That year, same-store • 2011. Average per-store fuel volume growth was 5.8 percent for the year, up from 4.9 percent in 2011. Twenty-five new stores were opened in 2012—with ten of those opening in the last quarter of the year. Stripes had retail sales of just over $1 million with 14.5 percent sales growth in 2012. It had 472 stores, increasing its numbers by 3.3 percent over 2011.

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246 Susser Holdings 2013 I n August 2013, Stripes was listed at the #24 spot in the 2013 Hot 100 Retailers according to Kantar Retail, which made the company the highest-ranked convenience store chain on the chart. The Hot 100 Retailers represented an annual ranking of the nation’s fastest growing retail companies, determined by increases in domestic sales. At the end of 2012, there were nearly 150,000 convenience stores in the United States according to Nielsen Research, accounting for a little more than a third of all retail stores in the country. Stripes had opened up eight new stores so far in 2013 and had recently hired Sid Keswani from Target stores to serve as senior vice president of store operations. Acquiring Gainesville Fuels I n early September 2013, Susser Holdings acquired Gainesville Fuels, Inc., a wholesale fuel and lubricants distributor of about sixty million gallons of diesel annually to oil and gas producers in North Texas and South Oklahoma. It was transferred to the holdings of Susser Petroleum Partners LP. The Partners would assume Gainesville’s debt and issue $2 million in stock to the Holdings Corporation, which would record a one-time deferred tax charge of about $3.6 million. The purchase opened up new wholesale markets for the petroleum partnership, and it also expanded sales to existing customers in the new service areas. Beginning in 2014, company officials expected that the acquisition would generate distributable cash flow for Partners’ stock of 5-10 cents per share and about 3-7 cents per share to Holdings’ stock. First printed report showing $6 billion dollars, September 2013

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248 Susser Holdings Leadership Changes I n mid-September, Susser Holdings announced that Sam L. would be the new chairman of the board, succeeding Bruce Krysiak who would become lead independent director. Sam L. would retain his position as CEO of the corporation. Rob L. Jones became lead independent director of Susser Petroleum Partners, and Frank A. Risch was elected to the board, while Andrew M. “Drew” Alexander was elected to the holdings board. Management promotions were also made at the company. Rocky Dewbre was named president and CEO of Susser Petroleum while Gail Workman was promoted to senior vice president and CEO, and Kevin Mahany was promoted to senior vice president, merchandising, at Stripes, LLC. More growth was achieved in 2013. A 3 percent increase in merchandise sales at stores open at least a year was seen as well as a 15 percent rise in total gallons for the 4th quarter and an 8 percent increase for the full year experienced by Susser Petroleum Partners. Susser Holdings shares finished at $61.59 per share on January 13, 2014. The company added 21 net stores, closing the year with 580 locations. Memorabilia