These positive items were partially offset by the weakening Canadian [image-nocss] dollar and a slight decrease in merchandise and service consolidated gross margin.
"Our teams managed to find concrete and effective solutions to overcome pitfalls we are facing, namely the recession, the important and repetitive tax increases on tobacco products as well as the numerous minimum wage increases," said Alain Bouchard, president and CEO. "I therefore believe our first quarter results were satisfying; however, given the fact that economic conditions remain difficult, we must remain prudent. I am still not ready to say the recession is behind us," he concluded.
Raymond Pare, vice president and CFO, added, "Same-store motor fuel volume in the United States is growing, which is good news considering the performance recorded in the previous quarters. I also feel positive about the merchandise and service gross margin improvement in the United States. These are indicators that our operations in the United States are progressing well. This adds to our cost reductions initiatives which are generating interesting results in both Canada and the United States."
Revenues amounted to $3.7 billion in the first quarter of fiscal 2010, down $643.9 million, a decrease of 14.9% compared to the first quarter of fiscal 2009. The decline is chiefly the result of a $1.1 billion decrease in motor fuel revenues resulting from a lower sale price and an adverse impact of $100 million from the weakening Canadian dollar. These factors contributing to the decrease were partially offset by a $471.0 million increase generated by acquisitions as well as by the growth of same-store merchandise revenues and motor fuel volume in both the United States and Canada.
More specifically, the growth of merchandise and service revenues for the first quarter of fiscal 2010 was $88.8 million, an increase of 6.8% compared to the same period last fiscal year, of which $117 million was generated by acquisitions, partially offset by a $53 million related to the depreciation of the Canadian dollar against its U.S. counterpart. Regarding internal growth, as measured by the growth in same-store merchandise revenues, it rose by 2.4% in the United States, mainly because of the increase in tobacco products retail prices following the increases in taxes on these products. As for the Canadian market, the increase in same-store merchandise revenues was 2.6%.
Motor fuel revenues decreased by $732.7 million or 24.3% in the first quarter of fiscal 2010. The lower average retail price at the pump in the United Stated and Canada created a drop in revenues of $1.1 billion.
Acquisitions contributed 141 million additional gallons in the first quarter, or $361.0 million in revenues, partially offset by the depreciation of the Canadian dollar against its U.S. counterpart, resulting in a decrease in revenues of $47.0 million. As for the growth in same-store motor fuel volume, it was 1.6% in the United States and 1.5% in Canada. The performance in the United States is a nice improvement over the previous four quarters which had posted important same-store volume decreases because of the harsh economic conditions.
The merchandise and service gross margin fell slightly by 0.2% in the first quarter of fiscal 2010 from 33.4% during the same period in fiscal 2009. In the United States, despite additional tax increases on tobacco products on July 1st, 2009 in Florida and Mississippiwhich add to the significant federal tax increase that became effective April 1, 2009the gross margin was 32.8%, an increase from 32.4% the previous year.
As for Canada, margin fell to 34.2%, a 1.3% decrease; however, it has to be noted that in the first quarter of fiscal 2009, the margin was unusually high since it had benefited from adjustments related to obligations towards dealers in the Western Canada division as well as from retroactive adjustments to certain suppliers rebates. Excluding these non-recurring items, for the first quarter of fiscal 2009, the margin would have been 35% in Canada and 33.3% on a consolidated basis. In addition, in both the United States and Canada, gross margin reflects Couche-Tard's merchandising strategy in tune with market competitiveness and economic conditions within each market and the fact that some recent acquisitions posted a lower gross margin than the existing network thereby lowering the overall gross margin. This latter situation should improve as integration and improved supply terms strategies are implemented.
During the first quarter, the motor fuel gross margin for company-operated stores in the United States decreased by 0.12 cents per gallon, from 15.55 cents per gallon last year to 15.43 cents per gallon this year. In Canada, the margin rose, reaching 5.76 cents (Canadian) per liter compared with 5.53 cents per liter in the first quarter of fiscal 2009.
For the first quarter of fiscal 2010, operating, selling, administrative and general expenses rose by 1.9% compared with the first quarter of fiscal 2009. Theses expenses increased by 11.5% because of acquisitions while they decreased by 3.3% and 2.6%, respectively because of the weaker Canadian dollar and the decrease in electronic payment modes expenses. Excluding these items, expenses decreased by 3.7%. Moreover, excluding expenses related to electronic payment modes for both comparable periods, expenses in proportion of merchandise and service sales decreased by 0.9%. Couche-Tard's prudent management of other controllable expenses as well as cost reduction measures it has put in place are the main reasons for the decrease.
Earnings before interests, taxes, depreciation and amortization (EBITDA) was $178.4 million for the first quarter of fiscal 2010, up 32.1% compared with last fiscal year. Acquisitions contributed to EBITDA for an amount of $12 million during the quarter.
For the quarter, the depreciation expense increased due to the investments made through acquisitions and the ongoing implementation of the IMPACT program within Couche-Tard's network.
For the first quarter, financial expenses decreased by $2.9 million compared with last fiscal year. This decrease is the result of the combined reduction in Couche-Tard's average borrowings and interest rates.
The income tax rate for the first quarter of fiscal 2010 is 28% compared to a rate of 42.6% for the same quarter last fiscal year which was negatively impacted by a non-recurring income tax expense resulting from a corporate reorganization. Excluding this non-recurring income tax expense, the income tax rate for the first quarter of last fiscal year stood at 32.6%, 4.6% higher than the current quarter. This favorable rate variance comes in great part from the benefits of the corporate reorganization put in place during fiscal 2009.
In the course of fiscal year 2010, Couche-Tard expects to pursue its investments with caution in order to, amongst other things, deploy its IMPACT program. Given the economic climate and its attractive access to capital, the company is well positioned to realize acquisitions and create value; however, the company will continue to exercise patience in order to benefit from a fair price in view of current market conditions. Couche-Tard also intends to keep an ongoing focus on its supply terms and operating expenses.
Finally, in line with its business model, Couche-Tard intends to continue to focus its resources on the sale of fresh products and on innovation, including the introduction of new products and services, in order to satisfy the needs of its large clientele.
In North America, Laval, Quebec-based Couche-Tard is the second largest independent convenience store operator (whether integrated with a petroleum company or not) in terms of number of stores. Couche-Tard currently has a network of 5,906 convenience stores, 4,122 of which include motor fuel dispensing, located in 11 large geographic markets, including eight in the United States covering 43 states and the District of Columbia and three in Canada covering 10 provinces.
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