We increased our cash flow from operations 13.9% to $147.8 million.
We used a little more than $100 million for capital expenditures.
Some of that total, approximately $40 million, was spent on
acquisitions. We built new stores for roughly $15 million. The
distribution center addition cost us close to $10 million. Routine
store maintenance, major remodels, and replacements accounted
for nearly $22 million. Infrastructure costs for transportation and
information systems came to about $15 million.

The accompanying chart shows the capital expenditure budget
for fiscal 2007. “Note the amount we’ve earmarked for acquisitions,”
said Chief Financial Officer Bill Walljasper. “Not only do we have the
ability to take advantage of acquisition opportunities, we also have
the appetite.” Included in the budget are the expenses associated
with rebranding acquisitions, adding kitchens to the acquired
Gas ‘N Shop sites, and knocking down and rebuilding stores
where necessary.

What you as shareholders are most interested in is a good return
on invested capital. Fiscal 2005’s ROIC was 8%—not as high
as we wanted. Fiscal 2006’s ROIC was 10.6%, a healthy return
bolstered by improved store performance and profits from
acquisitions we made in fiscal 2005.

Growing profit is essential to improving the ROIC—so is
containing expenses. “You already know we met our goal of
holding the percentage increase in operating expenses to less than
the percentage increase in gross profit,” Walljasper stated. “You
don’t know the specifics associated with two main components
of operating expenses: credit card fees and wages.”

During the year, we experienced a 30% increase in credit card usage
as customers charged more expensive gasoline; in turn, our fees
went up 38.7%. Wages were up 8.4% for the best of reasons: bonuses
paid for increasing gross profit and controlling expenses.