Couche-Tard Revenues Up

With the acquisitions carried out in the past 12 months and the sharp increase in the retail price at the pump, Alimentation Couche-Tard Inc. posted solid growth in revenues for the third quarter of fiscal 2008.

Revenues for the 16-week period ended February 3, 2008, rose 31.2%, reaching $4.6 billion, i.e. an increase of $1.1 billion. An amount of $613.5 million stems from the sharp rise in the price of gasoline and $314.2 million results from the acquisitions carried out over the past 12 months.

Net earnings were $50.5 million compared with $43.7 million last year, representing an increase of 15.6%. Excluding the reversal of the unusual income tax expense recorded during the first quarter of 2007, net earnings fell 7.1%.

"Given the more difficult economic climate in certain regions of the U.S. and the negative effect on merchandise and service revenues, motor fuel volume sold and margins, we are satisfied with the results achieved," said Alain Bouchard, chairman, president and CEO of Couche-Tard. "Past experience has shown us that Couche-Tard has managed to thrive in unfavorable economic periods, for instance through profitable acquisitions, and our intention is to once again pursue that path."

Revenues amounted to $4.6 billion for the 16-week period ended Feb. 3, up $1.1 billion, for an increase of 31.2%, of which $314.2 million is attributable to the major acquisitions carried out over the past 12 months. For the first three quarters, Couche-Tard’s growth in revenues was $2.5 billion or 28%, which boosted its revenues to $11.7 billion, of which $1.4 billion is attributable to the major acquisitions. The proportion of its business in the United States is 80.1% compared with 79% for the 40-week period ended Feb. 4.

Merchandise and service revenues grew by $152 million or 11.2%, of which $50.5 million was generated by the stores acquired during the past 12 months and $70.8 million was generated by the 16.4% appreciation of the Canadian dollar against its U.S. counterpart. Internal growth, as measured by the increase in same-store merchandise revenues, was 2.4% in the U.S. and 1.6% in Canada. Growth in the U.S. followed the positive trend seen in the first six months despite the economic slowdown in some regions.

Couche-Tard has implemented aggressive promotions in certain customized categories and continued to implement one of its key success factors: its IMPACT program. In the Canadian market, the weather and the increase in contraband cigarette sales were determining factors in the slowdown of its performance. In the first three quarters, revenues jumped $506.5 million, of which $244.4 million stems from the stores acquired and $119.6 million is attributable to the sharp rise in the Canadian dollar. The growth of same-store merchandise and service revenues was 3.3% in the U.S. and 4.4% in Canada.

Motor fuel revenues increased $940.9 million or 44.0% for the 16-week period ended February 3, 2008, of which $613.5 million stems from a higher average retail price at the pump in its U.S. and Canadian company-operated stores, as shown in the following table, beginning with the fourth quarter of the year ended April 29, 2007.

Merchandise and service gross margin was 33.6% in the third quarter of 2008, compared with 34.2% in the third quarter of 2007. In the U.S., the gross margin was 32.9%, down from 33.8% last year. Several U.S. markets facing an unfavorable economic climate continued their customized promotions from the first six months in order to maintain and even increase the number of customers per store.

Motor fuel gross margin for company-operated stores in the U.S. rose 1.19 cents per gallon, from 13.19 cents per gallon last year to 14.38 cents per gallon this quarter.

Sale-Leaseback Benefit
In December, 2007, through its subsidiaries Circle K Stores Inc. and Mac’s Convenience Stores LLC., Couche-Tard entered into a sale and leaseback transaction with Cole Credit Property Trust II, Inc. relating to 83 properties for a total selling price of $131.4 million. The proceeds were used namely to reduce its term revolving unsecured operating credit. The properties sold are located in several states and are subject to lease agreements with an initial average term of 20 years.

Also during the third quarter, Couche-Tard implemented its IMPACT re-imaging program in 115 company-operated stores. As a result, 59% of the stores have now been converted to the IMPACT program, which gives the company "considerable opportunity for future internal growth," it said in a statement.


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