Company News

Couche-Tard Acquisition Imminent

Company to add about 200 stores before spring's end

LAVAL, Quebec -- Like buds waiting to pop open on a tree, about 200 stores are waiting for Alimentation Couche-Tard Inc. to sign on the dotted line this spring. During a conference call with investors yesterday, president and CEO Alain Bouchard confirmed that the Canadian company has entered into a confidentiality to purchase the stores, with a closing likely to come by early June.

"We have a confidentiality agreement signed, and if things go the way we think, we will probably finalize this acquisition by the end of this [fiscal] year," which ends in June, Bouchard said during the company's [image-nocss] third-quarter 2008 financial reports conference call.

At the beginning of the fiscal year, Couche-Tard had predicted it would purchase between 200 and 300 stores in the coming 12 months. As previously reported in CSP Daily News, the company has thus far purchased 28 corporate stores during the past 10 months; however, Bouchard is standing by the original figure.

"We bought 28 stores so far this year with the Sterling acquisition early in the year, and we're still confident…to buy another around 200 stores by the end of this fiscal year.… Maybe, though, the takeover would occur early next fiscal year."

Bouchard did not offer any hints as to where the stores are located or from whom they'll be purchased.

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

Revenues for the 16-week period ended Feb. 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 ($0.24 per share on a diluted basis) compared with $43.7 million (21 cents per share on a diluted basis) 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 United States and the negative effect on merchandise and service revenues, motor fuel volume sold and margins, we are satisfied with the results achieved," said Bouchard. "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."

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, 2007.

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 United States and 1.6% in Canada. Growth in the United States followed the positive trend seen in the first six months despite the economic slowdown in some regions.

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 United States and 4.4% in Canada.

Motor fuel revenues increased $940.9 million or 44% for the quarter, of which $613.5 million stems from a higher average retail price at the pump in its U.S. and Canadian company-operated stores.

The major acquisitions carried out over the past 12 months contributed 90.7 million additional gallons, or $263.7 million in revenues. The appreciation of the Canadian dollar against its U.S. counterpart was also responsible for $55.2 million of the increase. The same-store motor-fuel volume fell 1.0% in the United States and rose 5.3% in Canada.

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 United States, the gross margin was 32.9%, down from 33.8% last year. Over the first three quarters, the merchandise and service gross margin was 33.6% (that is, 32.9% in the United States, down by 0.8%, and 34.9% in Canada, constant with last year).

Motor fuel gross margin for company-operated stores in the United States rose 1.19¢ per gallon, from 13.19 cents per gallon last year to 14.38 cents per gallon this quarter. In Canada, the margin rose, reaching 5.03 cents (Canadian) per liter compared with 4.05 cents per liter for the corresponding quarter in 2007. For the 40-week period ended February 3, 2008, the motor-fuel gross margin for its company-operated stores in the United States was 14.65 cents per gallon compared with 15.50 cents per gallon for the corresponding first three quarters in the previous year. In Canada, the margin increased for the first three quarters to 5.03 cents per liter compared with 4.21 cents per liter last year.

Net earnings for the third quarter of fiscal 2008 is $50.5 million, which equals 25 cents per share or 24 cents per share on a diluted basis, compared with $43.7 million last year, an increase of $6.8 million or 15.6%. For the first three quarters, Couche-Tard closed the period with net earnings of $173.8 million, which equals 86 cents per share or 84 cents per share on a diluted basis, compared with $163 million last year, an increase of $10.8 million or 6.6%.

Laval, Quebec-based Alimentation Couche-Tard Inc. operates a network of 5,690 convenience stores, 3,440 of which include motor-fuel dispensing, located in nine large geographic markets, including six in the United States covering 29 states and three in Canada covering six provinces.

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