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LAVAL, Quebec -- For the second quarter in fiscal 2007, Alimentation Couche-Tard reported record revenues and margins, allowing the company to walk away with almost $75 million in net earnings.
"We achieved an excellent second quarter," said Alain Bouchard, chairman, president and chief executive for Couche-Tard. "We are pleased with our results, with the implementation of our IMPACT program and with our network developments, mainly driven by our acquisitions." The company's IMPACT program was implemented in an additional 119 stores through the quarter, bringing the total of company-operated stores using the program since the start of fiscal 2007 to 158, or almost 50 percent.
Net earnings increased $19.2 million over the second quarter in 2006, or 34.6 percent for the second quarter of 2007. Revenue grew 15.4 percent to $2.76 billion for the quarter, and the company's cash equaled $140.9 million.
Consolidated merchandise and service gross margins also increased 1 percent to 34.1 percent for the quarter, due to implementation of the IMPACT program and positive food purchasing conditions, Bouchard said. Same-store merchandise revenues were also healthy, Bouchard noted, "especially since last year we benefited from aggressive promotional campaigns in some markets, much more favorable weather conditions and an exceptional increase in revenues following the hurricanes in Florida and Gulf Coast Region last year."
Gasoline sales were more positive in the U.S. than Canada for the company's second quarter. Sharp declines in Canadian pump prices lead to a decrease in the quarter's gross margin for gas, while in the U.S., motor fuel volume grew 23.4 percent, due to the contribution of its acquired Spectrum stores and successful pricing strategies, said Bouchard. Gas revenues for the company's quarter totaled $1.68 billion, an increase of 20.1 percent over the second quarter in 2006. Gross margins in the U.S. grew 21.6 percent in the second quarter of 2007, however, "the volatility in margins tends to stabilize on an annual basis," Bouchard noted.
During the second quarter, the company added 157 stores to its portfolio, 87 of which are company operated and 70 being affiliates. In addition, 67 sites were closed in the quarter, bringing the store count to 5,204 as of quarter end on Oct. 15.
In the second quarter, Couche-Tard finalized the acquisition of 24 Stop-n-Save stores in Monroe, La., operated by Moore Oil Co. Couche-Tard will operate 11 of the stores, while the remaining 13 will be independently operated. Later, the company completed the acquisition of Holland Oil Co.'s 56 company operated stores under the Holland Oil and Close to Home banners in Ohio.
On Oct. 9, the company committed to acquire 52 properties from its landlords to manage the renewal risk for those leased stores. Once finalized, the transaction will cost the company $61 million. Later that month, the company purchased 24 Sparky's stores located in West Central Florida, from Sparky's Oil Co.
The biggest agreement signed during the second quarter was with Shell Oil Products US and its affiliate, Motiva Enterprises LLC. Through that, the company will acquire 236 stores under the Shell banner in the regions of Baton Rouge, Denver, Memphis, Orlando, Tampa and Southwest Florida. Of those, 175 are company-operated, 49 are operated by independent operators and 12 currently have a motor fuel supply agreement. This transaction is expected to be completed in December of 2006 and will contribute to the company's operating income on an annual basis. The monetary amount of this agreement will be decided upon its closing.
Also during the quarter, SSP Partners, parent of Susser Holdings, notified the company it would not be renewing its license agreement for 318 Circle K stores in Texas. Neither party could agree on renewal terms, which will expire on Nov. 26. The impact will not be significant on the company's financial position or operating results, Couche-Tard stated.
Looking ahead, the company wants to maximize productivity and growth through a network of 600 company-operated stores. To do this, the company has split the U.S. Midwest business into two separate divisions, effective Dec. 1. The newly created Great Lakes division will operate in Ohio, Michigan and Pennsylvania. Its Midwest division will operate stores in Kentucky, Indiana, Illinois and Iowa.
"Considering the number of acquisition opportunities in which we have taken part of in the last months and those envisaged going forward, and taking into account the time and effort of our development and technical services teams in such projects, the objective of the IMPACT renovation program has been reduced to approximately 400 stores for the current year," said Bouchard.
He continued: "During the second half year, we will benefit from the impact of our new acquisitions while taking advantage of other expansion opportunities in strategic markets in North America. We are confident the company will maintain satisfactory growth and achieve solid results in upcoming periods."
Alimentation Couche-Tard Inc. operates under the Couche-Tard, Mac's and Circle K trademarks, and is the third largest convenience store operator and the second largest independent convenience store operator in North America. The company currently operates a network of 5,204 convenience stores, 3,235 of which include motor fuels. Those stores are located in eight geographic markets, including three in Canada covering seven provinces and territories and five which cover 23 states in the U.S.