LAVAL, QC, March 9 /PRNewswire-FirstCall/ -- For its third quarter,
Alimentation Couche-Tard Inc. announces net earnings of $54.8
million, down $16.3 million or 22.9%, mainly the result of a
5.33cents per gallon decrease in motor fuel gross margins in the
United States, an estimated impact of more than $37.0 million after
income taxes. During the comparable period last fiscal year, motor
fuel gross margins in the United-States were relatively high,
whereas this year's margins are in the low average of expectations
based on historical margins. This decrease attributable to motor
fuel gross margins was partially offset by the increase in
same-store merchandise sales in Canada and the United States, by
the contribution from stores acquired as well as by a lower income
tax rate. "Overall, third quarter's results are satisfying
considering the motor fuel gross margin recorded in our U.S.
markets. Despite a drop in U.S. motor fuel margins compared to the
same period last fiscal year, we considerably improved our
performance", declared Alain Bouchard, President and Chief
Executive Officer. "On an annual basis, margin is in line with our
expectations based on historical margins which average 13 to 15
cents per gallon", he added. "It is therefore important to remember
that it is advisable to analyze this component on a longer period.
As a matter of fact, since the beginning of fiscal 2010, the
average margin in the United States is 14.54 cents per gallon", he
concluded. As for Raymond Pare, Vice-President and Chief Financial
Officer, he indicated: "It is even so extraordinary to see that we
increased our earnings per share for the first three quarters
despite the facts that our results were deprived from a $85,0
million after income taxes because of lower fuel margins. We are
evolving in a difficult economic situation but we continued to
deliver solid sales and profitability indicators. As a matter of
fact, we have decreased operating expenses under our control for a
fourth quarter in a row, which is quite satisfying. Must we add the
historically, motor fuel margin represents only 20% to 25% of total
gross margin. The largest part of our earnings comes from
merchandise and service sales, which are less volatile." Highlights
of the Third Quarter of Fiscal 2010 Changes in the Store Network
The following table presents certain information regarding changes
in Couche-Tard's stores network over the 16 and 40-week periods
ended January 31, 2010: 16-week period ended 40-week period ended
January 31, 2010 January 31, 2010
------------------------------------------------------------
Company- Affi- Company- Affi- operated liated operated liated
stores stores Total stores stores Total
------------------------------------------------------------ Number
of stores, beginning of period 4,405 1,499 5,904 4,395 1,048 5,443
Acquisi- tions(1) 6 - 6 55 444 499 Openings / construc- tions /
additions 9 30 39 15 61 76 Closures / disposals / withdrawals (22)
(44) (66) (67) (68) (135) Conversions to affi- liated stores (2) 2
- (2) 2 -
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Number of stores, end of period 4,396 1,487 5,883 4,396 1,487 5,883
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(1) Includes Couche-Tard's share of the company-operated stores
operated by the joint venture created with Shell (50% of the 69
company- operated stores), but excluding the 32 stores which were
already part of Couche-Tard's network and which are now operated by
the joint venture. Joint venture On January 6, 2010, Couche-Tard
created along with Shell Oil Products US ("Shell"), a joint
venture, RDK Ventures LLC ("RDK"), to operate 100 convenience
stores in the greater Chicago metropolitan area of the United
States, including 69 company-operated stores and 31 stores operated
by third party operators. All of the company-operated stores will
be operated by Couche-Tard's Midwest Division under the Circle K
banner, while Shell branded products will continue to be marketed
and sold. The stores held by Shell were transferred over to the
joint venture through a combination of purchased and contributed
fee and leased sites. Line items from RDK's statement of earnings
and balance sheet are reflected in Couche-Tard's consolidated
financial statements using the proportionate consolidation method.
Business acquisitions During the third quarter of fiscal 2010,
Couche-Tard acquired another three stores through three distinct
transactions. In addition, on January 12, 2010, Couche-Tard signed
an agreement with Accel Marketing LLC to acquire eight stores in
central North Carolina. The transaction is anticipated to close in
April 2010 and is subject to standard regulatory approvals and
closing conditions. Dividends During its March 9, 2010 meeting,
considering Couche-Tard's good results and strong balance sheet,
the Company's Board of Directors (the "Board") decided it was
appropriate to amend the quarterly dividend by increasing it by
Cdn$0.005 per share, which thereby corresponds to Cdn$0.04 per
share. Additionally, at the same meeting, the Board declared a
quarterly dividend of the same amount for the third quarter of
fiscal 2010 to shareholders on record as at March 18, 2010, and
approved its payment for March 26, 2010. This is an eligible
dividend within the meaning of the Income Tax Act of Canada.
Interest rate swap agreement During the third quarter of fiscal
2010, the interest rate swap agreement Couche-Tard held as at April
26, 2009 was terminated by the counterparty in exchange for the
payment of a penalty on their part corresponding to the value of
the swap. Following the termination of the agreement, Couche-Tard
discontinued hedge accounting for the swap. The fair value of the
terminated swap recorded as part of the Subordinated unsecured debt
is amortized using the effective rate method over the remaining
portion of the initial term of the hedging relationship. Based on
current interest rates, Couche-Tard expects that the termination of
the swap will increase its financial expenses by approximately $3.0
million on an annual basis. Subsequent event On February 16, 2010,
Couche-Tard acquired from BP West Coast Products LLC their terminal
facilities located in Phoenix, Arizona in the United States. The
terminal facilities include 16 storage tanks with a storage
capacity of 220,000 barrels. The terminal is approved for 44,000
barrels per day and has access to petroleum products from
refineries on the West Coast and in the Gulf Coast region of the
United States. Strategically, this acquisition should add
efficiencies in Couche-Tard's fuel supply chain servicing its
retail network in the region of Phoenix. Exchange Rate Data The
Company's US dollar reporting provides more relevant information
given the predominance of its operations in the United States and
its debt largely dominated in US dollars. The following table sets
forth information about exchange rates based upon the Bank of
Canada closing rates expressed as US dollars per Cdn$1.00: 16-week
periods ended 40-week periods ended
------------------------------------------------ January February
January February 31, 2010 1st, 2009 31, 2010 1st, 2009
------------------------------------------------ Average for
period(1) 0.9499 0.8156 0.9173 0.9018 Period end 0.9352 0.8153
0.9352 0.8153
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(1) Calculated by taking the average of the closing exchange rates
of each day in the applicable period. As the Company uses the US
dollar as its reporting currency, in its consolidated financial
statements and in the present document, unless indicated otherwise,
results from its Canadian and corporate operations are translated
into US dollars using the average rate for the period. Variances
and explanations related to variations in the foreign exchange rate
and the volatility of the Canadian dollar which are discussed in
the present document are therefore related to the translation in US
dollars of the Company's Canadian and corporate operations results
and do not have a true economic impact on its performance since
most of the Company's consolidated revenues and expenses are
received or denominated in the functional currency of the markets
in which it does business. Accordingly, the sensitivity of the
Company's results to variations in foreign exchange rates is
economically limited. Selected Consolidated Financial Information
The following table highlights certain information regarding
Couche-Tard's operations for the 16-week and 40-week periods ended
January 31, 2010 and February 1st, 2009:
------------------------------------------------------------ (In
millions of US dollars, unless otherwise stated) 16-week periods
ended 40-week periods ended
------------------------------------------------------------
January February Varia- January February Varia- 31, 1st, tion 31,
1st, tion 2010 2009 % 2010 2009 %
------------------------------------------------------------
Statement of Operations Data: Merchandise and service revenues(1):
United States 1,161.0 1,104.3 5.1 3,061.3 2,861.7 7.0 Canada 554.7
448.8 23.6 1,461.5 1,338.4 9.2
------------------------------------------------------------ Total
merchan- dise and service revenues 1,715.7 1,553.1 10.5 4,522.8
4,200.1 7.7
------------------------------------------------------------ Motor
fuel revenues: United States 2,684.2 1,989.1 34.9 6,591.5 7,360.5
(10.4) Canada 535.3 369.5 44.9 1,321.8 1,226.5 7.8
------------------------------------------------------------ Total
motor fuel revenues 3,219.5 2,358.6 36.5 7,913.3 8,587.0 (7.8)
------------------------------------------------------------ Total
revenues 4,935.2 3,911.7 26,2 12,436.1 12,787.1 (2.7)
------------------------------------------------------------
------------------------------------------------------------
Merchandise and service gross profit(1): United States 381.7 362.0
5.4 1,002.8 930.4 7.8 Canada 183.7 151.2 21.5 495.3 461.6 7.3
------------------------------------------------------------ Total
merchan- dise and service gross profit 565.4 513.2 10.2 1,498.1
1,392.0 7.6
------------------------------------------------------------ Motor
fuel gross profit: United States 130.2 177.5 (26.6) 373.4 459.8
(18.8) Canada 35.6 24.0 48.3 93.0 67.3 38.2
------------------------------------------------------------ Total
motor fuel gross profit 165.8 201.5 (17.7) 466.4 527.1 (11.5)
------------------------------------------------------------ Total
gross profit 731.2 714.7 2.3 1,964.5 1,919.1 2.4 Operating,
selling, adminis- trative and general expenses 589.9 546.6 7.9
1,468.4 1,436.3 2.2 Depreciation and amorti- zation of property and
equip- ment and other assets 63.2 56.4 12.1 155.1 140.4 10.5
------------------------------------------------------------
Operating income 78.1 111.7 (30.1) 341.0 342.4 (0.4)
------------------------------------------------------------ Net
earnings 54.8 71.1 (22.9) 234.1 215.9 8.4
------------------------------------------------------------
------------------------------------------------------------ Other
Operating Data: Merchandise and service gross margin(1): Consoli-
dated 33.0% 33.0% - 33.1% 33.1% - United States 32.9% 32.8% 0.1
32.8% 32.5% 0.3 Canada 33.1% 33.7% (0.6) 33.9% 34.5% (0.6) Growth
(decrease) of same- store merchandise revenues(2)(3): United States
3.0% 0.5% 2.7% (0.1%) Canada 4.9% 4.7% 4.2% 1.9% Motor fuel gross
margin(3): United States (cents per gallon): 12.88 18.21 (29.3)
14.54 19.54 (25.6) Canada (Cdn cents per litre) 5.16 4.38 17.8 5.44
4.76 14.3 Volume of motor fuel sold(4): United States (millions of
gallons) 1,043.3 1,004.4 3.9 2,656.4 2,433.6 9.2 Canada (millions
of litres) 724.8 669.9 8.2 1,860.9 1,556.7 19.5 (Decrease) increase
of same-store motor fuel volume(3): United States (0.2%) (6.2%)
1.5% (7.1%) Canada 1.4% 6.5% 2.0% 4.1%
------------------------------------------------------------ Per
Share Data: Basic net earnings per share (dollars per action) 0.30
0.37 (18.9) 1.27 1.11 14.4 Diluted net earnings per share (dollars
per action) 0.29 0.36 (19.4) 1.24 1.09 13.8
------------------------------------------------------------
January April Varia- 31, 26, tion 2010 2009 $
------------------------------------------------------------
Balance Sheet Data: Total assets 3,568.0 3,255.9 312.1 Interest-
bearing debt 862.2 749.2 113.0 Shareholders' equity 1,533.6 1,326.0
207.6 Ratios: Net interest- bearing debt/total capitali- zation(5)
0.32 : 1 0.30 : 1 Net interest- bearing debt/EBITDA(6) 1.20 : 1(7)
0.98 : 1
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(1) Includes other revenues derived from franchise fees, royalties
and rebates on some purchases by franchisees and licensees. (2)
Does not include services and other revenues (as described in
footnote 1 above). Growth in Canada is calculated based on Canadian
dollars. (3) For company-operated stores only. (4) Includes volume
of franchisees and dealers. (5) This ratio is presented for
information purposes only and represents a measure of financial
condition used especially in financial circles. It represents the
following calculation: long-term interest- bearing debt, net of
cash and cash equivalents and temporary investments, divided by the
addition of shareholders' equity and long-term debt, net of cash
and cash equivalents and temporary investments. It does not have a
standardized meaning prescribed by Canadian GAAP and therefore may
not be comparable to similar measures presented by other public
companies. (6) This ratio is presented for information purposes
only and represents a measure of financial condition used
especially in financial circles. It represents the following
calculation: long-term interest- bearing debt, net of cash and cash
equivalents and temporary investments, divided by EBITDA (Earnings
Before Interest, Tax, Depreciation and Amortization). It does not
have a standardized meaning prescribed by Canadian GAAP and
therefore may not be comparable to similar measures presented by
other public companies. (7) This ratio was standardized over a
period of one year. It includes the results of the first, second
and third quarters of the fiscal year which will end April 25, 2010
as well as of the fourth quarter of fiscal year ended April 26,
2009. Operating Results Revenues amounted to $4.9 billion in the
third quarter of fiscal 2010, up $1.0 billion, an increase of 26.2%
compared to the third quarter of fiscal 2009. The increase is
chiefly the result of a $632.0 million rise in motor fuel revenues
resulting from a higher average retail price, the positive impact
of $154.0 million from a stronger Canadian dollar, a $112.0 million
increase generated by acquisitions as well as the growth of
same-store merchandise revenues in the United States and Canada and
same-store motor fuel volume in Canada. As for the first three
quarters of fiscal 2010, revenues dropped by $351.0 million, a
decrease of 2.7% compared to the first three quarters of fiscal
2009. The decline is mainly the result of a $1.4 billion decrease
in motor fuel revenues resulting from a lower average retail price.
This factor contributing to the decrease was partially offset by a
$734.0 million increase in revenues generated by acquisitions, a
$21.0 million positive impact of the stronger Canadian dollar, 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 third quarter of fiscal 2010 was $162.6 million, an increase of
10.5% compared to the same period of the previous fiscal year, of
which $33.0 million was generated by acquisitions and $78.0 million
by the appreciation of the Canadian dollar against its U.S.
counterpart. Regarding internal growth, as measured by same-store
merchandise revenues, it rose by 3.0% in the United States,
attributable to 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 4.9%. In the first three quarters, merchandise and service
revenues rose by $322.7 million, a 7.7% increase compared to the
same period last fiscal year for reasons similar to those of the
third quarter, including an increase in same-store merchandise
revenues of 2.7% in the United States and 4.2% in Canada. Motor
fuel revenues increased by $860.9 million or 36.5% in the third
quarter of fiscal 2010. The higher average retail price at the pump
in the United Stated and Canada created a rise in revenues of
$632.0 million, as shown in the following table, beginning with the
fourth quarter of the fiscal year ended April 26, 2009: Quarter
Weighted 4th 1st 2nd 3rd average
-------------------------------------------------------------------------
52-week period ended January 31, 2010 United States (US dollars per
gallon) 1.95 2.41 2.48 2.59 2.38 Canada (Cdn cents per litre) 78.67
88.80 89.24 90.00 87.13 52-week period ended February 1st, 2009
United States (US dollars per gallon) 3.22 3.91 3.67 2.00 3.08
Canada (Cdn cents per litre) 103.69 122.66 114.37 78.05 101.60
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Acquisitions contributed 27.0 million additional gallons in the
third quarter of fiscal 2010, or $78.0 million in revenues, in
addition to the increase in revenues of $76.0 million generated by
the appreciation of the Canadian dollar against its U.S.
counterpart. As for the same-store motor fuel volume, it dropped
slightly by 0.2% in the United States and increased by 1.4% in
Canada. Motor fuel revenues decreased by $673.7 million or 7.8% for
the first three quarters of fiscal 2010. Lower average retail
prices led to a $1.4 billion drop in motor fuel revenues, while
acquisitions contributed 205.0 million additional gallons, or
$546.0 million in revenues, in addition to the $14.0 million
increase in revenues from the appreciation of the Canadian dollar
against its U.S. counterpart. As for the growth in same-store motor
fuel volume, it was 1.5% in the United States and 2.0% in Canada.
For the third quarter of fiscal 2010, the consolidated merchandise
and service gross margin remained stable at 33.0%. In the United
States, the gross margin was 32.9%, slightly higher than the 32.8%
recorded in the previous fiscal year. As for Canada, the margin
fell to 33.1%, a 0.6% decrease due to a less profitable product
mix, which put downward pressure on the percent margin while
remaining positive in absolute amount given the increase in terms
of units sold. In both the United States and Canada, revenues and
gross margin reflect Couche-Tard's merchandising strategy in tune
with market competitiveness and economic conditions within each
market, improved supply terms as well as its revenue mix. As for
the first three quarters of fiscal 2010, the consolidated
merchandise and service gross margin was 33.1%. More specifically,
it was 32.8% in the United States, an increase of 0.3%, and 33.9%
in Canada, a decrease of 0.6%. In Canada, as indicated by
Couche-Tard's in its first quarterly report, the gross margin this
fiscal year compares to a margin that benefited from non-recurring
amounts in the first quarter of fiscal 2009 related to obligations
towards dealers in the Western Canada division as well as from
retroactive adjustments to certain suppliers rebates. During the
third quarter of fiscal 2010, the motor fuel gross margin for
Couche-Tard's company-operated stores in the United States
decreased significantly by 5.33 cents per gallon, from 18.21 cents
per gallon last year to 12.88 cents per gallon this quarter. It
should be noted that last year's gross margin was rather high. In
Canada, the margin rose, reaching Cdn5.16 cents per litre compared
to Cdn4.38 cents per litre in the third quarter of fiscal 2009. The
motor fuel gross margin of Couche-Tard's company-operated stores in
the United States as well as the impact of expenses related to
electronic payment modes for the last eight quarters, beginning
with the fourth quarter of the fiscal year ended April 26, 2009
were as follows: (US cents per gallon) Weighted Quarter 4th 1st 2nd
3rd average
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52-week period ended January 31, 2010 Before deduction of expenses
related to electronic payment modes 11.38 15.43 15.78 12.88 13.82
Expenses related to electronic payment modes 3.10 3.56 3.79 3.85
3.60
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After deduction of expenses related to electronic payment modes
8.28 11.87 11.99 9.03 10.22
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52-week period ended February 1st, 2009 Before deduction of
expenses related to electronic payment modes 10.02 15.55 24.88
18.21 17.42 Expenses related to electronic payment modes 4.02 5.07
4.94 3.15 4.19
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After deduction of expenses related to electronic payment modes
6.00 10.48 19.94 15.06 13.23
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As for the 40-week period ended January 31, 2010, the motor fuel
gross margin for Couche-Tard's company-operated stores in the
United States decreased by 5.00 cents per gallon, from 19.54 cents
per gallon last fiscal year to 14.54 cents per gallon this fiscal
year, a drop of 25.6%. In Canada, the margin rose, reaching Cdn
5.44 cents per litre compared with Cdn4.76 cents per litre for the
comparable period of fiscal 2009. The average motor fuel margin
since the beginning of fiscal 2010 is in line with Couche-Tard's
expectations based on historical margins. As mentioned in the past,
it is advisable to analyse this indicator over longer periods
rather than on a quarterly basis because motor fuel margins are
subject to fluctuations over short periods, but stabilize on a
longer term. For the third quarter of fiscal 2010, operating,
selling, administrative and general expenses increased by 7.9%
compared with last fiscal year. These expenses increased by 2.8%
due to acquisitions while they increased by 4.5% and 1.8%,
respectively because of the appreciation of the Canadian dollar and
the increase in electronic payment modes expenses. Excluding these
items, expenses decreased by 1.2%. Moreover, excluding expenses
related to electronic payment modes for both comparable periods,
expenses in proportion of merchandise and service sales represented
31.3% of sales this fiscal year compared to 32.6% last fiscal year.
With respect to the first three quarters of 2010, operating,
selling, administrative and general expenses increased by 2.2%
compared with the comparable period of the previous fiscal year.
These expenses increased by 5.6% due to acquisitions and 0.3% due
to the appreciation of the Canadian dollar, while they decreased by
0.9% due to the drop in electronic payment modes expenses.
Excluding these items, expenses therefore decreased by 2.8%.
Moreover, excluding expenses related to electronic payment modes
for both comparable periods, expenses in proportion of merchandise
and service sales represented 29.6% of sales during the first three
quarters of fiscal 2010 compared to 31.0% during the comparable
period of the previous fiscal year. Couche-Tard's prudent
management of controllable expenses as well as sustainable cost
reduction measures it has put in place are the main reasons for
these decreases. This performance is quite satisfactory, especially
considering that expenses, excluding the impact of acquisitions,
exchange rate and electronic payment mode expenses, have decreased
for a fourth consecutive quarter, without affecting the service we
offer our clients. Earnings before interests, taxes, depreciation
and amortization (EBITDA) were $141.3 million for the third quarter
of fiscal 2010, down 15.9% compared to the comparable period of the
previous fiscal year, and was $496.1 million for the first three
quarters of fiscal 2010, up 2.8%. Acquisitions contributed to
EBITDA for an amount of $5.8 million during the third quarter and
$24.6 million during the first three quarters. The decrease in the
third quarter is chiefly due to the drop of 5,33 cents per gallon
in the motor fuel margin in the United States, which corresponds to
a decrease of approximately $52.0 million in EBITDA. It should be
noted that EBITDA is not a performance measure defined by Canadian
GAAP, but Couche-Tard's management, investors and analysts use this
measure to evaluate the Company's financial and operating
performance. Note that Couche-Tard's definition of this measure may
differ from the one used by other public companies: (in millions of
16-week periods ended 40-week periods ended US dollars) January
February January February 31, 2010 1st, 2009 31, 2010 1st, 2009
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Net earnings, as reported 54.8 71.1 234.1 215.9
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Add : Income taxes 14.7 30.3 84.4 97.1 Financial expenses 8.6 10.3
22.5 29.4 Depreciation and amortization of property and equipment
and other assets 63.2 56.4 155.1 140.4
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EBITDA 141.3 168.1 496.1 482.8
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For the third quarter and the first three quarters of fiscal 2010,
the depreciation expense increased due to the investments made
through acquisitions, replacement of equipment and the ongoing
improvement of Couche-Tard's network. For the third quarter and the
first three quarters of fiscal 2010, financial expenses decreased
by $1.7 million and $6.9 million, respectively, compared with last
fiscal year. These decreases are chiefly the result of the
reduction in Couche-Tard's average interest rates. The income tax
rate for the third quarter of fiscal 2010 is 21.1% compared to a
rate of 29.9% for the same quarter last fiscal year. As for the
first three quarters of fiscal 2010, the rate is 26.5% compared to
a rate of 31.0% for the comparable period last fiscal year.
Decrease in the rate reflects the corporate reorganization put in
place during last fiscal year as well as rate adjustments from the
comparison of estimated income tax expense to the actual income tax
expense following preparation of income tax returns. The average
rate recorded since the beginning of the fiscal year should reflect
that of the fiscal year in general. Couche-Tard closed the third
quarter of fiscal 2010 with net earnings of $54.8 million, which
equals $0.30 per share (or $0.29 per share on a diluted basis),
compared to $71.1 million last fiscal year ($0.37 per share or
$0.36 per share on a diluted basis), a decrease of $16.3 million or
22.9%. This is a very good performance given the relatively high
motor fuel gross margin in the United States posted during the
third quarter of 2009. The impact of the 5.33 cents per gallon
decrease in the motor fuel gross margin in the United States
corresponds to a drop of over $37.0 million in net earnings during
the third quarter. As for the first three quarters of fiscal 2010,
net earnings were $234.1 million ($1.27 per share or $1.24 per
share on a diluted basis), compared to $215.9 million the previous
fiscal year ($1.11 per share or $1.09 per share on a diluted
basis), an increase of $18.2 million or 8.4%, despite a motor fuel
gross margin in the United States inferior to last fiscal year by
5,00 cents per gallon, which represents a decrease of approximately
$85.0 million in net earnings. It has to be noted that the motor
fuel margin in the United States for the first three quarters of
fiscal year 2009 was particularly high while fuel margin of the
ongoing fiscal year is in line with Couche-Tard's expectations
considering historical margins. Liquidity and Capital Resources
Couche-Tard's sources of liquidity remain unchanged compared with
the fiscal year ended April 26, 2009. For further information,
please refer to the Company's 2009 Annual Report. With respect to
Couche-Tard's capital expenditures, acquisitions and share
repurchases carried out in the first three quarters of fiscal 2010,
they were financed using available cash flow and credit facilities.
Couche-Tard expects that its cash available from operations
together with borrowings available under its revolving unsecured
credit facilities, as well as potential sale and leaseback
transactions, will meet its liquidity needs in the foreseeable
future. Couche-Tard's credit facilities, totalling $1 billion, have
not changed with respect to their terms of use since April 26, 2009
and they will only mature in September 2012. As at January 31,
2010, $471.0 million of its term revolving unsecured operating
credits had been used ($385.0 million for the US dollar portion and
$86.0 million for the Canadian dollar portion). At such date, the
weighted average effective interest rate was 0.75% for the US
dollar portion and 0.90% for the Canadian dollar portion. In
addition, standby letters of credit in the amount of Cdn$1.0
million and $26.6 million were outstanding as at January 31, 2010.
Couche-Tard also has a $351.8 million subordinated unsecured debt
(nominal value amounting to $350.0 million, net of attributable
financing costs of $9.1 million, adjusted of amounts received for
the early termination of interest rate swap agreements which are
amortized on the remaining term of the debt using the effective
rate method), bearing interest at an effective rate of 7.35%. It
should be noted that amounts received for the early termination of
interest rate swaps agreements represented swap's fair value as of
the date of the termination. Selected Consolidated Cash Flow
Information (In millions of US dollars) 16-week periods ended
40-week periods ended
------------------------------------------------------------
January February Varia- January February Varia- 31, 1st, tion 31,
1st, tion 2010 2009 $ 2010 2009 $
------------------------------------------------------------
Operating activities Cash flows(1) 117.1 132.4 (15.3) 394.3 374.4
19.9 Other (142.7) (44.5) (98.2) (179.6) (79.5) (100.1)
------------------------------------------------------------ Net
cash (used in) from operating activities (25.6) 87.9 (113.5) 214.7
294.9 (80.2)
------------------------------------------------------------
Investing activities Purchase of property and equip- ment, net of
proceeds from the disposal of property and equip- ment (92.8)
(50.3) (42.5) (160.8) (133.5) (27.3) Business acquisi- tions (44.3)
(0.8) (43.5) (111.9) (67.0) (44.9) Proceeds from sale and lease-
back transactions 1.0 9.3 (8.3) 10.6 11.9 (1.3) Other (1.8) (0.9)
(0.9) (6.4) (6.6) 0.2
------------------------------------------------------------ Net
cash used in investing activities (137.9) (42.7) (95.2) (268.5)
(195.2) (73.3)
------------------------------------------------------------
Financing activities Increase (decrease) in long- term borrowings
110.2 (117.1) 227.3 80.2 (134.7) 214.9 Dividends (6.1) (5.5) (0.6)
(18.0) (18.8) 0.8 Amount received following early termination of an
interest rate swap agreement 2.5 - 2.5 2.5 - 2.5 Issuance of shares
0.3 0.6 (0.3) 2.3 0.6 1.7 Share repurchase - (2.4) 2.4 (56.4)
(46.2) (10.2)
------------------------------------------------------------ Net
cash from (used in) financing activities 106.9 (124.4) 231.3 10.6
(199.1) 209.7
------------------------------------------------------------
------------------------------------------------------------
Corporate credit rating Standard and Poor's BB+ BB+ BB+ BB+
Moody's(2) Ba1 Ba1 Ba1 Ba1
-------------------------------------------------------------------------
(1) These cash flows are presented for information purposes only
and represent a performance measure used especially in financial
circles. They represent cash flows from net earnings, plus
depreciation and amortization, loss on disposal of assets and
future income taxes. They do not have a standardized meaning
prescribed by Canadian GAAP and therefore may not be comparable to
similar measures presented by other public companies. (2)
Represents the last published corporate credit rating as attributed
to Couche-Tard by Moody's. During the third quarter of fiscal 2010,
Moody's indicated that it would not attribute corporate credit
ratings to Couche-Tard anymore given the fact it does not consider
the Company as a speculative grade issuer anymore. Operating
activities During the third quarter of fiscal 2010, $25.6 million
were used to fund operating activities, chiefly due to changes in
working capital, including the decrease in income tax and accounts
payable as well as the increase in accounts receivables and prepaid
expenses. During the first three quarters of 2010, net cash from
operating activities reached $214.7 million, down $80.2 million
from the comparable period of fiscal 2009, chiefly due to changes
in working capital. Investing activities During the third quarter
of fiscal 2010, Couche-Tard's investing activities were primarily
for the acquisition of company-operated stores, including
investments in stores operated by the joint venture with Shell, and
for capital expenditures. Capital expenditures were primarily for
the replacement of equipment in some of Couche-Tard's
company-operated stores to enhance its offering of products and
services and to comply with regulations, the addition of new stores
as well as the ongoing improvement of its network. Financing
activities During the third quarter of fiscal 2010, Couche-Tard
recorded a $110.2 million increase in long-term borrowings. In
addition, Couche-Tard paid $6.1 million in dividends and cashed an
amount of $2.5 million following the early termination, by the
counterparty, of the Company's interest rate swap agreement.
Financial Position as at January 31, 2009 As shown by Couche-Tard's
indebtedness ratios included in the "Selected Consolidated
Financial Information" section and its net cash provided by
operating activities, the Company's financial position is
excellent. Its total consolidated assets amounted to $3.6 billion
as at January 31, 2010 compared to $3.3 billion as at April 26,
2009. This increase is chiefly the result of five factors: 1. The
increase in property and equipment mainly resulting from the
acquisition of stores; 2. The increase of in-store merchandise
inventory due to a greater number of stores; 3. The increase in
motor fuel inventory due to a higher product cost compared to the
fourth quarter of fiscal 2009 and a greater number of stores
selling motor fuel; 4. The increase in credit and debit cards
receivables driven by higher motor fuel retail price compared to
the fourth quarter of fiscal 2009 as well as the increase in
supplier rebates receivable following the increase in merchandise
inventories; and 5. An overall increase in Canadian and corporate
operations assets once translated in U.S. dollars due to a stronger
Canadian dollar as at the balance sheet date. Shareholders' equity
amounted to $1.5 billion as at January 31, 2010, up $207.6 million
compared to April 26, 2009, reflecting net earnings generated
during the current fiscal year and the increase in accumulated
other comprehensive income due to the strengthening of the Canadian
dollar, partially offset by the share repurchases made during the
first three quarters of 2010. Selected Quarterly Financial
Information (Unaudited) (In millions of US dollars except for per
share data, 40-week period ended unaudited) January 31, 2010
-------------------------------------------------------------------------
Quarter 3rd 2nd 1st Weeks 16 weeks 12 weeks 12 weeks
----------------------------------- Revenues 4,935.2 3,825.8
3,675.1 ----------------------------------- Income before
depreciation and amorti- zation of property and equipment and other
assets, financial expenses and income taxes 141.3 176.4 178.4
Depreciation and amortiza- tion of property and equipment and other
assets 63.2 46.9 45.0 ----------------------------------- Operating
income 78.1 129.5 133.4 -----------------------------------
Financial expenses 8.6 7.0 6.9 -----------------------------------
Net earnings 54.8 88.2 91.1 -----------------------------------
----------------------------------- Net earnings per share Basic
$0.30 $0.48 $0.49 Diluted $0.29 $0.47 $0.48
-------------------------------------------------------------------------
Extract from the (In millions of 52-week US dollars period except
for per ended share data, 52-week period ended April 27, unaudited)
April 26, 2009 2008
-------------------------------------------------------------------------
Quarter 4th 3rd 2nd 1st 4th Weeks 12 weeks 16 weeks 12 weeks 12
weeks 13 weeks
-----------------------------------------------------------
Revenues 2,994.0 3,911.7 4,556.4 4,319.0 3,705.8
----------------------------------------------------------- Income
before depreciation and amorti- zation of property and equipment
and other assets, financial expenses and income taxes 105.0 168.1
179.7 135.0 63.7 Depreciation and amortiza- tion of property and
equipment and other assets 42.6 56.4 41.1 42.9 39.9
-----------------------------------------------------------
Operating income 62.4 111.7 138.6 92.1 23.8
-----------------------------------------------------------
Financial expenses 6.8 10.3 9.3 9.8 9.1
----------------------------------------------------------- Net
earnings 38.0 71.1 97.6 47.2 15.5
-----------------------------------------------------------
----------------------------------------------------------- Net
earnings per share Basic $0.20 $0.37 $0.50 $0.24 $0.08 Diluted
$0.20 $0.36 $0.49 $0.24 $0.08
-------------------------------------------------------------------------
Outlook In the course of the last quarter of its fiscal year 2010,
Couche-Tard expects to pursue its investments with caution in order
to, amongst other things, improve its network. Given the economic
climate and its attractive access to capital, Couche-Tard believes
to be well positioned to realize acquisitions and create value.
However, Couche-Tard will continue to exercise patience in order to
benefit from a fair price in view of current market conditions. The
Company 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. Profile Alimentation Couche-Tard Inc. is the
leader in the Canadian convenience store industry. In North
America, Couche-Tard is the largest independent convenience store
operator (whether integrated with a petroleum company or not) in
terms of number of company-operated stores. Couche-Tard currently
operates a network of 5,883 convenience stores, 4,142 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 all ten
provinces. More than 53,000 people are employed throughout
Couche-Tard's retail convenience network and service centers. The
statements set forth in this press release, which describes
Couche-Tard's objectives, projections, estimates, expectations or
forecasts, may constitute forward-looking statements within the
meaning of securities legislation. Positive or negative verbs such
as "plan", "evaluate", "estimate", "believe" and other related
expressions are used to identify such statements. Couche-Tard would
like to point out that, by their very nature, forward-looking
statements involve risks and uncertainties such that its results,
or the measures it adopts, could differ materially from those
indicated or underlying these statements, or could have an impact
on the degree of realization of a particular projection. Major
factors that may lead to a material difference between
Couche-Tard's actual results and the projections or expectations
set forth in the forward-looking statements include the effects of
the integration of acquired businesses and the ability to achieve
projected synergies, fluctuations in margins on motor fuel sales,
competition in the convenience store and retail motor fuel
industries, exchange rate variations, and such other risks as
described in detail from time to time in the reports filed by
Couche-Tard with securities authorities in Canada and the United
States. Unless otherwise required by applicable securities laws,
Couche-Tard disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. The forward-looking
information in this release is based on information available as of
the date of the release. Webcast on March 9, 2010 at 3:30 P.M.
(EST)
-------------------------------------------------------------------------
Couche-Tard invites analysts known to the Company to send their two
questions in advance to its management, before 1:30 P.M. (EST) on
March 9, 2010. Financial analysts and investors who wish to listen
to the webcast on Couche-Tard's results which will take place
online on March 9, 2010 at 3:30 P.M. (EST) can do so by accessing
the Company's website at http://www.couche-tard.com/ and by
clicking on the corporate presentations link of the investor
relations section. For those who will not be able to listen to the
live presentation, the recording of the webcast will be available
on the Company's website for a period of 90 days. CONSOLIDATED
STATEMENTS OF EARNINGS (in millions of US dollars, except per share
amounts, unaudited) 16 weeks 40 weeks For the periods ended January
February January February 31, 2010 1st, 2009 31, 2010 1st, 2009
-------------------------------------------------------------------------
$ $ $ $ Revenues 4,935.2 3,911.7 12 436.1 12,787.1 Cost of sales
(excluding depreciation and amortization of property and equipment
and other assets as shown separately below) 4,204.0 3,197.0
10,471.6 10,868.0
-------------------------------------------------------------------------
Gross profit 731.2 714.7 1,964.5 1,919.1
-------------------------------------------------------------------------
Operating, selling, administrative and general expenses 589.9 546.6
1,468.4 1,436.3 Depreciation and amortization of property and
equipment and other assets 63.2 56.4 155.1 140.4
-------------------------------------------------------------------------
653.1 603.0 1,623.5 1,576.7
-------------------------------------------------------------------------
Operating income 78.1 111.7 341.0 342.4 Financial expenses 8.6 10.3
22.5 29.4
-------------------------------------------------------------------------
Earnings before income taxes 69.5 101.4 318.5 313.0 Income taxes
14.7 30.3 84.4 97.1
-------------------------------------------------------------------------
Net earnings 54.8 71.1 234.1 215.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per share (Note 5) Basic 0.30 0.37 1.27 1.11 Diluted
0.29 0.36 1.24 1.09 Weighted average number of shares (in
thousands) 183,594 192,919 184,413 194,545 Weighted average number
of shares - diluted (in thousands) 188,458 196,979 188,870 198,476
Number of shares outstanding at end of period (in thousands)
183,611 192,778 183,611 192,778
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions of US
dollars, unaudited) For the periods ended 16 weeks 40 weeks January
February January February 31, 2010 1st, 2009 31, 2010 1st, 2009
-------------------------------------------------------------------------
$ $ $ $ Net earnings 54.8 71.1 234.1 215.9 Other comprehensive
income Changes in cumulative translation adjustments(1) (3.1)
(21.3) 43.6 (89.0) Change in fair value of a financial instrument
designated as a cash flow hedge(2) 0.1 - 0.8 - Gain realized on a
financial instrument designated as a cash flow hedge transferred to
earnings(3) (0.1) - (0.2) -
-------------------------------------------------------------------------
Other comprehensive income (3.1) (21.3) 44.2 (89.0)
-------------------------------------------------------------------------
Comprehensive income 51.7 49.8 278.3 126.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) For the 16 and 40-week periods ended January 31, 2010, these
amounts include a loss of $5.3 and a gain of $65.9, respectively
(net of income taxes of $3.9 and $23.8, respectively). For the 16
and 40-week periods ended February 1st, 2009 these amounts include
a loss of $29.4 and $140.3, respectively (net of income taxes of
$12.5 and $63.1, respectively). These gains and losses arise from
the translation of US dollar denominated long-term debt designated
as a foreign exchange hedge of the Company's net investment in its
foreign self-sustaining operations. (2) For the 16 and 40-week
periods ended January 31, 2010, these amounts are net of income
taxes of $0.1 and $0.3, respectively. (3) For the 16 and 40-week
periods ended January 31, 2010, these amounts are net of income
taxes of $0.1 each. The accompanying notes are an integral part of
the consolidated financial statements. CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS' EQUITY (in millions of US dollars,
unaudited) For the 40-week period ended January 31, 2010
-------------------------------------------------------------------------
Accumu- lated other Contri- compre- Share- Capital buted Retained
hensive holders' stock surplus earnings income equity
-------------------------------------------------------------------------
$ $ $ $ $ Balance, beginning of period 329.1 17.7 932.6 46.6
1,326.0 Comprehensive income: Net earnings 234.1 234.1 Change in
cumulative translation adjustments 43.6 43.6 Change in fair value
of a financial instrument designated as a cash flow hedge (net of
income taxes of $0.3) 0.8 0.8 Gain realized on a financial
instrument designated as a cash flow hedge transferred to earnings
(net of income taxes of $0.1) (0.2) (0.2) ----------- Comprehensive
income 278.3 ----------- Dividends (18.0) (18.0) Stock-based
compensation expense (note 7) 1.4 1.4 Fair value of stock options
exercised 0.9 (0.9) - Cash received upon exercise of stock options
2.3 2.3 Repurchase and cancellation of shares (13.0) (13.0) Excess
of acquisition cost over book value of Class A multiple voting
shares and Class B subordinate voting shares repurchased and
cancelled (43.4) (43.4)
-------------------------------------------------------------------------
Balance, end of period 319.3 18.2 1,105.3 90.8 1,533.6
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For the 40-week period ended February 1st, 2009
-------------------------------------------------------------------------
Accumu- lated other Contri- compre- Share- Capital buted Retained
hensive holders' stock surplus earnings income equity
-------------------------------------------------------------------------
$ $ $ $ $ Balance, beginning of period 348.8 15.6 775.0 114.3
1,253.7 Comprehensive income: Net earnings 215.9 215.9 Change in
cumulative translation adjustments (89.0) (89.0) -----------
Comprehensive income 126.9 ----------- Dividends (18.8) (18.8)
Stock-based compensation expense (note 7) 2.3 2.3 Fair value of
stock options exercised 0.3 (0.3) - Cash received upon exercise of
stock options 0.6 0.6 Repurchase and cancellation of shares (9.6)
(9.6) Excess of acquisition cost over book value of Class A
multiple voting shares and Class B subordinate voting shares
repurchased and cancelled (30.0) (30.0)
-------------------------------------------------------------------------
Balance, end of period 340.1 17.6 942.1 25.3 1,325.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS (in
millions of US dollars, unaudited) 16 weeks 40 weeks For the
periods ended January February January February 31, 2010 1st, 2009
31, 2010 1st, 2009
-------------------------------------------------------------------------
$ $ $ $ Operating activities Net earnings 54.8 71.1 234.1 215.9
Adjustments to reconcile net earnings to net cash provided by
operating activities Depreciation and amortization of property and
equipment and other assets, net of amortization of deferred credits
55.3 48.2 134.8 122.7 Future income taxes 5.8 14.3 26.1 33.5 Loss
(gain) on disposal of property and equipment and other assets 1.2
(1.2) (0.7) 2.3 Deferred credits 3.5 4.9 12.3 9.0 Other 5.9 6.4
14.8 13.6 Changes in non-cash working capital (152.1) (55.8)
(206.7) (102.1)
-------------------------------------------------------------------------
Net cash (used in) provided by operating activities (25.6) 87.9
214.7 294.9
-------------------------------------------------------------------------
Investing activities Purchase of property and equipment (107.9)
(56.5) (182.4) (144.6) Business acquisitions (Note 4) (44.3) (0.8)
(111.9) (67.0) Proceeds from disposal of property and equipment and
other assets 15.1 6.2 21.6 11.1 Increase in other assets (1.8)
(0.9) (6.4) (6.6) Proceeds from sale and leaseback transactions 1.0
9.3 10.6 11.9
-------------------------------------------------------------------------
Net cash used in investing activities (137.9) (42.7) (268.5)
(195.2)
-------------------------------------------------------------------------
Financing activities Net increase (decrease) in long-term debt
110.2 (117.1) 80.2 (134.7) Dividends (6.1) (5.5) (18.0) (18.8)
Interest rate swap early termination fee received 2.5 - 2.5 -
Issuance of shares 0.3 0.6 2.3 0.6 Repurchase of shares - (2.4)
(56.4) (46.2)
-------------------------------------------------------------------------
Net cash provided by (used in) financing activities 106.9 (124.4)
10.6 (199.1)
-------------------------------------------------------------------------
Effect of exchange rate fluctuations on cash and cash equivalents
(0.8) (4.5) 8.2 (12.4)
-------------------------------------------------------------------------
Net decrease in cash and cash equivalents (57.4) (83.7) (35.0)
(111.8) Cash and cash equivalents, beginning of period 195.7 187.9
173.3 216.0
-------------------------------------------------------------------------
Cash and cash equivalents, end of period 138.3 104.2 138.3 104.2
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental information: Interest paid 12.6 14.7 27.5 33.9 Income
taxes paid 55.5 6.5 97.5 53.0
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements. CONSOLIDATED BALANCE SHEETS (in millions of
US dollars) As at As at January April 31, 2010 26, 2009 (unaudited)
-------------------------------------------------------------------------
$ $ Assets Current assets Cash and cash equivalents 138.3 173.3
Accounts receivable 291.1 225.4 Income taxes receivable 8.6 -
Inventories 461.3 400.3 Prepaid expenses 29.5 8.5 Future income
taxes 35.3 37.0
-------------------------------------------------------------------------
964.1 844.5 Property and equipment 1,949.3 1,789.4 Goodwill 410.4
384.8 Trademarks and licenses 174.2 172.0 Deferred charges 9.8 10.9
Other assets 53.9 49.8 Future income taxes 6.3 4.5
-------------------------------------------------------------------------
3,568.0 3,255.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities Current liabilities Accounts payable and accrued
liabilities 718.8 758.1 Income taxes payable - 26.3 Future income
taxes 0.2 0.7 Current portion of long-term debt 3.8 3.9
-------------------------------------------------------------------------
722.8 789.0 Long-term debt 858.4 745.3 Deferred credits and other
liabilities 282.2 259.0 Future income taxes 171.0 136.6
-------------------------------------------------------------------------
2,034.4 1,929.9
-------------------------------------------------------------------------
Shareholders' equity Capital stock 319.3 329.1 Contributed surplus
18.2 17.7 Retained earnings 1,105.3 932.6 Accumulated other
comprehensive income 90.8 46.6
-------------------------------------------------------------------------
1,533.6 1,326.0
-------------------------------------------------------------------------
3,568.0 3,255.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US dollars, except per share and stock option data,
unaudited) 1. CONSOLIDATED FINANCIAL STATEMENTS PRESENTATION The
unaudited interim consolidated financial statements have been
prepared by the Company in accordance with Canadian generally
accepted accounting principles (Canadian GAAP) and have not been
subject to a review engagement by the Company's external auditors.
These consolidated financial statements were prepared in accordance
with the same accounting policies and methods as the audited annual
consolidated financial statements for the fiscal year ended April
26, 2009, with the exception of the accounting changes described in
Note 2 below. The unaudited interim consolidated financial
statements do not include all the information for complete
financial statements and should be read in conjunction with the
audited annual consolidated financial statements and notes thereto
included in the Company's 2009 Annual Report (the 2009 Annual
Report). The results of operations for the interim periods
presented do not necessarily reflect results expected for the full
year. The Company's business follows a seasonal pattern. The
busiest period is the first half of each fiscal year, which
includes summer's sales. 2. ACCOUNTING CHANGES Goodwill and
Intangible Assets On April 27, 2009, the Company adopted Canadian
Institute of Chartered Accountants (CICA) Handbook Section 3064
"Goodwill and Intangible Assets", replacing Section 3062 "Goodwill
and Other Intangible Assets" and Section 3450 "Research and
Development Costs". The new Section establishes standards for the
recognition, measurement, presentation and disclosure of goodwill
subsequent to its initial recognition and of intangible assets by
profit-oriented enterprises. Standards relating to goodwill are
unchanged from the standards included in the previous Section 3062.
The adoption of this new Section had no impact on the Company's
consolidated financial statements. Accounting Changes In June 2009,
CICA amended Section 1506 "Accounting Changes", to exclude from the
scope of this Section, changes in accounting policies upon the
complete replacement of an entity's primary basis of accounting.
This amendment is effective for fiscal years beginning after July
1st, 2009. Early adoption is permitted. On October 12, 2009, the
Company early adopted this standard. The adoption of this new
Section had no impact on the Company's consolidated financial
statements. Financial Instruments - Disclosures In June 2009, CICA
amended Section 3862 "Financial Instruments - Disclosures" to
enhance disclosure requirements about liquidity risk of financial
instruments. The amendment also includes new disclosure
requirements about fair value measurement of financial instruments.
This amendment is effective for fiscal years ending after September
30, 2009. The required disclosure will be included in the Company's
fiscal year 2010 annual consolidated financial statements. 3.
INTEREST IN A JOINT VENTURE On January 6, 2010, the Company created
along with Shell Oil Products ("Shell"), a joint venture, RDK
Ventures LLC ("RDK"), to operate 100 convenience stores located in
the greater Chicago metropolitan area of the United States, 69 of
which are company-operated and the 31 remaining stores are operated
by third party operators. The sites held by Shell were transferred
to RDK by a combination of purchased, contributed fee and lease
sites. Line items from RDK's statement of earnings and balance
sheet are reflected in the Company's consolidated financial
statements using the proportionate consolidation method since Shell
and the Company have joint control over the joint venture. The
Company owns a 50.01% interest in RDK and the major components of
the interest included in the consolidated financial statements are
as follows: $
-------------------------------------------------------------------------
Balance sheet (as of January 31, 2010) Current assets 18.1
Long-term assets 64.4 Current liabilities 17.5 Long-term
liabilities 25.1 Statement of earnings (for the 16 and 40 weeks
periods ended January 31, 2010) Revenues 21.5 Expenses 21.6 Net
earnings (0.1) Cash flows (for the 16 and 40 weeks periods ended
January 31, 2010) Operating activities 11.5 Investing activities
(22.9) Financing activities 20.1
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Balance sheet items and transactions between the Company and the
joint venture were eliminated upon proportionate consolidation of
the joint venture. 4. BUSINESS ACQUISITIONS On May 28, 2009, the
Company purchased 43 company-operated stores in the Phoenix,
Arizona region, United-States from ExxonMobil Corporation. The
Company leases the lands and buildings related to nine sites, it
owns the building and leases the land for one site, while it owns
both these assets for the other sites. Under the same transaction,
ExxonMobil also transferred to the Company the "On the Run"
trademark rights in the United States as well as 444 franchised
stores operating under this trademark in the United States. On
January 6, 2010, through RDK (note 3), the Company participated in
the acquisition of 100 stores owned by Shell of which 69 are
company-operated and the remaining 31 stores are operated by third
party operators. As the Company's interest in RDK is 50.01%, the
transaction added 35 company-operated stores to the Company's
network, 32 of which were already operated (but not owned) by the
latter. RDK leases the land and buildings related to 55 sites, it
owns the buildings and leases the land for five sites and it owns
both these assets for the other sites. Since the beginning of the
fiscal year, the Company also acquired nine stores through five
distinct transactions. The Company owns the land and buildings for
five sites while it leases both these assets for the other four
sites. These acquisitions were settled for a total cash
consideration of $111.9, including direct acquisition costs. The
preliminary allocations of the purchase price of the acquisitions
were established based on available information and on the basis of
preliminary evaluations and assumptions management believes to be
reasonable. Since the Company has not completed its fair value
assessment of the net assets acquired for all transactions, the
preliminary allocations of certain acquisitions are subject to
adjustments to the fair value of the assets and liabilities until
the process is completed. The allocations are based on the
estimated fair values on the dates of acquisition: $ Tangible
assets acquired Inventories 8.2 Property and equipment 101.2 Other
assets 0.3
-------------------------------------------------------------------------
Total tangible assets 109.7
-------------------------------------------------------------------------
Liabilities assumed Accounts payable and accrued liabilities 2.0
Deferred credits and other liabilities 1.6
-------------------------------------------------------------------------
Total liabilities 3.6
-------------------------------------------------------------------------
Net tangible assets acquired 106.1
-------------------------------------------------------------------------
Intangibles 1.3 Goodwill 4.5
-------------------------------------------------------------------------
Total consideration paid, including direct acquisition costs 111.9
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The Company expects that approximately $1.0 of the goodwill related
to these transactions will be deductible for tax purposes. 5. NET
EARNINGS PER SHARE 16-week period 16-week period ended January 31,
2010 ended February 1st, 2009
------------------------------------------------------------
Weighted Weighted average average number number of Net of Net
shares earnings shares earnings Net (in thou- per Net (in thou- per
earnings sands) share earnings sands) share
------------------------------------------------------------ $ $ $
$ Basic net earnings attributable to Class A and B share- holders
54.8 183,594 0.30 71.1 192,919 0.37 Dilutive effect of stock
options 4,864 (0.01) 4,060 (0.01)
------------------------------------------------------------
Diluted net earnings available for Class A and B share- holders
54.8 188,458 0.29 71.1 196,979 0.36
------------------------------------------------------------
------------------------------------------------------------
40-week period 40-week period ended January 31, 2010 ended February
1st, 2009
------------------------------------------------------------
Weighted Weighted average average number number of Net of Net
shares earnings shares earnings Net (in thou- per Net (in thou- per
earnings sands) share earnings sands) share
------------------------------------------------------------ $ $ $
$ Basic net earnings attributable to Class A and B share- holders
234.1 184,413 1.27 215.9 194,545 1.11 Dilutive effect of stock
options 4,457 (0.03) 3,931 (0.02)
------------------------------------------------------------
Diluted net earnings available for Class A and B share- holders
234.1 188,870 1.24 215.9 198,476 1.09
------------------------------------------------------------
------------------------------------------------------------ A
total of 794,875 stock options are excluded from the calculation of
the diluted net earnings per share due to their antidilutive effect
for the 16-week period ended January 31, 2010 (1,093,105 stock
options for the 40-week period ended January 31, 2010). There are
1,702,675 stocks options excluded from the calculation for the
16-week period ended February 1st, 2009 (1,665,860 stocks options
for the 40-week period ended February 1st, 2009). 6. CAPITAL STOCK
As at January 31, 2010, the Company has 53,706,712 (53,722,712 as
at February 1st, 2009) issued and outstanding Class A multiple
voting shares each comprising ten votes per share and 129,903,847
(139,055,608 as at February 1st, 2009) outstanding Class B
subordinate voting shares each comprising one vote per share. On
August 10, 2009, the Company implemented a share repurchase program
which allows to repurchase up to 2,685,370 Class A multiple voting
shares (representing 5.0% of the 53,707,412 Class A multiple voting
shares issued and outstanding as at July 24, 2009) and up to
12,857,284 Class B subordinate voting shares (representing 10.0% of
the 128,572,846 Class B subordinate voting shares of the public
float, as defined by applicable rules, as at July 24, 2009). When
making such repurchases, the number of issued and outstanding Class
A multiple voting shares and Class B subordinate voting shares is
reduced and the proportionate interest of the shareholders in the
share capital of the Company is increased on a pro rata basis. As
at January 31, 2010, no shares had been repurchased under this
program. Since the beginning of fiscal 2010, pursuant to the
previous share repurchase program described in Note 18 of the
consolidated financial statements presented in the 2009 Annual
report and which expired on August 7, 2009, the Company repurchased
3,700 Class A multiple voting shares at an average cost of
Cdn$14.49 and 4,296,000 Class B subordinate voting shares at an
average cost of Cdn$14.63. All shares repurchased under the share
repurchase programs are cancelled upon repurchase. 7. STOCK-BASED
COMPENSATION AND OTHER STOCK-BASED PAYMENTS Stock Options As at
January 31, 2010, 8,613,428 stock options for the purchase of Class
B subordinate voting shares are outstanding (8,995,603 as at
February 1st, 2009). These stock options can be gradually exercised
at various dates until September 12, 2019, at an exercise price
varying from Cdn$2.38 to Cdn$25.71. Three series of stock options
totaling 105,000 stock options at an exercise price ranging from
Cdn$13.15 to Cdn$19.85 were granted since the beginning of the
fiscal year. For the 16 and 40-week periods ended January 31, 2010,
the stock-based compensation costs amount to $0.5 and $1.4,
respectively. For the 16 and 40-week periods ended February 1st,
2009, the stock-based compensation costs amount to $0.8 and $2.3,
respectively. The fair value of stock options granted is estimated
at the grant date using the Black & Scholes option pricing
model on the basis of the following assumptions for the stock
options granted since the beginning of the fiscal year: - risk-free
interest rate of 3.03%; - expected life of 8 years; - expected
volatility of 33%; - expected quarterly dividend of Cdn$0.035 per
share. The weighted average fair value of stock options granted
since the beginning of the fiscal year is Cdn$6.49 (Cdn$5.34 as at
February 1st, 2009). A description of the Company's stock option
plan is included in Note 19 of the consolidated financial
statements presented in the 2009 Annual Report. Phantom Stock Units
On May 1st, 2009, the Company implemented a Phantom Stock Unit
("PSU") Plan allowing the Board of Directors, through its Human
Resources and Corporate Governance Committee, to grant PSUs, to the
officers and selected key employees of the Company (the
"Participants"). A PSU is a notional unit, which value is based on
the weighted average reported closing price for a board lot of the
Company's Class B subordinated voting share (the "Class B share")
on the Toronto Stock Exchange for the five trading days immediately
preceding the grant date. The PSU provides the Participant with the
opportunity to earn a cash award equal to the fair market value of
the Company's Class B shares on the open market of the Toronto
Stock Exchange upon vesting of the PSU. Each PSU initially granted
vest no later than one day prior to the third anniversary of the
grant date subject namely to the achievement of performance
objectives of the Company, based on external and internal
benchmarks, over a three-year performance period. PSUs are not
dilutive since they are solely payable in cash. The PSU
compensation cost and the related liability are recorded on a
straight-line basis over the corresponding vesting period based on
the fair market value of Class B shares and the best estimate of
the number of PSUs that will ultimately be paid. The liability is
adjusted periodically to reflect any variation in the fair market
value of the Class B shares. The Company granted 1,221 PSUs for the
16-week period ended January 31, 2010. For the 40-week period ended
January 31, 2010, the Company granted a total of 194,277 PSUs while
it cancelled 5,323 PSUs and the compensation costs for the 16 and
40-week periods ended January 31, 2010 amount to $0.2 and $0.6,
respectively. As at January 31, 2010, 188,954 PSUs were
outstanding. On the consolidated balance sheet, the obligation
related to the PSU Plan is recorded in deferred credit and other
liabilities. To manage current and forecasted risks related to
changes in the fair market value of the PSUs granted by the
Company, the latter has entered into a financial arrangement with
an investment grade financial institution. The financial
arrangement includes a total return swap with an underlying
representing 189,072 Class B shares (the "Instrument"). The
Instrument is recorded at fair market value on the consolidated
balance sheet under other assets. The financial arrangement will be
adjusted as needed to reflect new awards, adjustments and/or
settlements of PSUs. The Company has documented and identified the
Instrument as a cash flow hedge of the anticipated cash settlement
transaction related to the granted PSUs. The Company has determined
that the instrument is an effective hedge at the time of the
establishment of the hedge and for the duration of the Instrument.
The changes in the fair value of the instrument are initially
recorded in consolidated other comprehensive income and
subsequently reclassified to consolidated net earnings in the same
period the recording of the change in the fair value of the PSUs
affects consolidated net earnings. Should it become probable that
the hedge transaction will not occur, any gains, losses, revenues
or expenses associated with the hedging item that had previously
been recognized in other comprehensive income as a result of
applying hedge accounting will be recognized in the reporting
period's net income. As at January 31, 2010, the fair value of the
Instrument was $1.2. 8. EMPLOYEE FUTURE BENEFITS For the 16 and
40-week periods ended January 31, 2010, the Company's total net
pension expense included in its consolidated statement of earnings
amounts to $1.8 and $5.6, respectively. For the corresponding 16
and 40-week periods ended February 1st, 2009, the expense is $1.4
and $4.3, respectively. The Company's pension plans are described
in Note 20 of the consolidated financial statements presented in
the 2009 Annual Report. 9. SEGMENTED INFORMATION The Company
operates convenience stores in the United States and in Canada. It
essentially operates in one reportable segment, the sale of goods
for immediate consumption and motor fuel through corporate stores
or franchise operations. It operates a convenience store chain
under several banners, including Couche-Tard, Mac's and Circle K.
Revenues from outside sources mainly fall into two categories:
merchandise and services and motor fuel. The following table
provides the information on the principal revenue classes as well
as geographic information: 16-week period 16-week period ended
January 31, 2010 ended February 1st, 2009
------------------------------------------------------------ United
United States Canada Total States Canada Total
------------------------------------------------------------ $ $ $
$ $ $ External customer revenues(a) Merchandise and services
1,161.0 554.7 1,715.7 1,104.3 448.8 1,553.1 Motor fuel 2,684.2
535.3 3,219.5 1,989.1 369.5 2,358.6
------------------------------------------------------------
3,845.2 1,090.0 4,935.2 3,093.4 818.3 3,911.7
------------------------------------------------------------
------------------------------------------------------------ Gross
Profit Merchandise and services 381.7 183.7 565.4 362.0 151.2 513.2
Motor fuel 130.2 35.6 165.8 177.5 24.0 201.5
------------------------------------------------------------ 511.9
219.3 731.2 539.5 175.2 714.7
------------------------------------------------------------
------------------------------------------------------------
Property and equipment and goodwill(a) 1,820.5 486.2 2,306.7
1,693.2 424.9 2,118.1
------------------------------------------------------------
------------------------------------------------------------
40-week period 40-week period ended January 31, 2010 ended February
1st, 2009
------------------------------------------------------------ United
United States Canada Total States Canada Total
------------------------------------------------------------ $ $ $
$ $ $ External customer revenues(a) Merchandise and services
3,061.3 1,461.5 4,522.8 2,861.7 1,338.4 4,200.1 Motor fuel 6,591.5
1,321.8 7,913.3 7,360.5 1,226.5 8,587.0
------------------------------------------------------------
9,652.8 2,783.3 12,436.1 10,222.2 2,564.9 12,787.1
------------------------------------------------------------
------------------------------------------------------------ Gross
Profit Merchandise and services 1,002.8 495.3 1,498.1 930.4 461.6
1,392.0 Motor fuel 373.4 93.0 466.4 459.8 67.3 527.1
------------------------------------------------------------
1,376.2 588.3 1,964.5 1,390.2 528.9 1,919.1
------------------------------------------------------------
------------------------------------------------------------ (a)
Geographic areas are determined according to where the Company
generates operating income (where the sale takes place) and
according to the location of the property and equipment and
goodwill. 10. SUBSEQUENT EVENT On February 16, 2010, the Company
acquired fuel terminal facilities in Phoenix, Arizona in the United
States from BP West Coast Products LLC. The terminal facilities
include 16 storage tanks with a storage capacity of 220,000
barrels. The terminal is approved for 44,000 barrels per day and
has access to petroleum products from refineries on the West Coast
and in the Gulf Coast region of the United States. DATASOURCE:
Alimentation Couche-Tard inc. CONTACT: Raymond Pare, Vice-President
and Chief Financial Officer, (450)662-6632 ext. 4607,
investor.relations@couche-tard.com
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