Couche-Tard Reports Strong Fourth Quarter, Fiscal 2010

Recent financial reports from Quebec-based Alimentation Couche-Tard Inc. might make it harder for Casey’s General Stores Inc. to convince shareholders to look the other way on Couche-Tard’s  bid to buy Casey’s for $36 per U.S. share.

Couche-Tard, owner of Mac’s corner store in Canada and Circle K in the U.S., surpassed financial expectations for its fourth quarter yesterday as it revealed an 81% increase in net profit with earnings of $68.8 million (37 cents per share), up $30.8 million compared to a year ago.

Fiscal 2010 diluted earnings per share were $1.60 compared to $1.29 last year despite the difficult economic context, particularly in the U.S.

Couche-Tard experienced the jump in profit net in the fourth quarter with help from a 2.83 cents per gallon increase in motor fuel gross margin in the U.S., an increase in same-store merchandise sales in Canada and the U.S., stores acquired, and  $8.7 million non recurring gain, net of taxes, from selling Casey’s shares.

“What’s extraordinary is the $49.0 million, or 19.3%, increase in fiscal 2010 net earnings (for Couche-Tard), despite a drop of 3.09 cents per gallon in motor fuel gross margins in the U.S. as compared to fiscal 2009,” said said  Raymond Paré, vice-president and chief financial officer for Couche-Tard. “This means we caught up with a shortfall of roughly $75.0 million on net earnings, or 40 cents per share on a diluted basis, with increased sales from existing stores and acquisitions and by controlling expenses. The performance of the quarter is in line with that of the one of previous quarters and reflects our ongoing focus on sales combined with sound management of margins, acquisitions that improve our bottom line and tight control over expenses.”

“I am very pleased with the efforts deployed during the fourth quarter and throughout fiscal 2010 which ultimately produced excellent quarterly results and a record-breaking year,” said Alain Bouchard, president and CEO of Couche-Tard.

In regards to Casey’s, he added, “Our strong preference is to enter into a negotiated transaction with Casey’s. It is unfortunate that the Casey’s board has rejected our $36 per share all-cash offer without any discussion or negotiation. We are committed to making this combination a reality as evidenced by the commencement of our tender offer and nomination of a slate of nine directors for election to the Casey’s board of directors.”

That sale is the subject of a lawsuit by Casey’s, which alleges that Couche-Tard manipulated the market by acquiring a stake of 1.9 million Casey’s shares at an artificially deflated price and making a profit after announcing a hostile offer for the company on April 9. Couche-Tard has denounced the claims and plans to fight them. Casey’s has also said the offer for its company is too low.

“We made the offer after a careful evaluation, and we believe our offer price represents full and fair value for Casey’s,” Couche-Tard’s Paré said.




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